A looming acquisition by GigaCloud Technology (GCT -7.85%) has led to a significant drop in the company's stock. Shareholders reacted negatively to the news of the acquisition, causing the stock to plummet by more than 25%. In contrast, the S&P 500 index only saw a 0.6% slump.
Prior to market open, GigaCloud announced its agreement to acquire most of privately held Noble House Home Furnishings and several affiliates. The specialty tech company will be paying $85 million for this acquisition. Noble House is currently undergoing Chapter 11 bankruptcy proceedings, and GigaCloud was the initial bidder in the process.
Noble House is a well-known maker, distributor, and seller of home furnishings. Its products are sold through various third-party businesses, including top retailers. GigaCloud believes that owning Noble House will complement their existing range of product offerings and enhance operational efficiency while expanding sales channels.
However, investors seem skeptical of this reasoning. They do not believe that Noble House's business is as compatible with GigaCloud as claimed. Additionally, the acquisition price may be considered relatively high, considering GigaCloud's cash reserves of less than $182 million at the end of the last reported quarter.