What happened
Shares of Canadian space star Maxar Technologies (NYSE: MAXR) are taking off (again) today, up 8% as of 3:08 p.m. EDT on a report that the money-losing company has found a way to literally turn its losses into an asset.
Continue Reading Below
As detailed in a press release today, Maxar “has adopted a tax benefit preservation plan to help preserve the value of its net operating losses and other tax attributes,” so that these can be used to reduce its tax bills on any profits it earns in the future.
So what
As the company explains, Maxar has accumulated “U.S. federal net operating loss carryforwards and federal R&D tax credit carryforwards [of] approximately $890 million and $77 million, respectively.” But “the value of these tax benefits would be substantially limited if Maxar were to experience an ‘ownership change'” — such as by anyone acquiring more than a 50% ownership of the company’s shares.
To prevent this from happening, Maxar says it’s issuing preferred-stock purchase rights to its shareholders that will entitle them to buy stock in the event of a takeover attempt. It would thus dilute the would-be acquirers’ ownership of Maxar and avoid both a chance of control and a loss of the tax credits.
Now what
Advertisement
That’s what Maxar says. If you ask me, though, this sounds an awful lot like a poison pill that Maxar is implementing, one that will make it hard for another space company to acquire Maxar at its current, depressed valuation. As such, I suspect the real purpose of Maxar’s move is not, in fact, to preserve net operating losses as much as it is to preserve management’s jobs — and deny investors a chance to earn a fat profit in the event of a takeover bid.
If I’m right, then the investors buying Maxar stock hand over fist today are making exactly the wrong move.
10 stocks we like better than Maxar Technologies Ltd.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Maxar Technologies Ltd. wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 1, 2019
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
