Resonant (RESN) faces probe after stock rallies 248% on Murata’s bid

The stocks of software company Resonant Inc. (NASDAQ: RESN) skyrocketed by over 248% on Tuesday morning after a subsidiary of Japan-based Murata Manufacturing Co., Ltd. offered to acquire the company at a premium of 265.9% on its last closing price. 

After the announcement, the RESN stock jumped 248.78% to US$4.29 at 11:13 am ET.  

According to the companies, both sides have entered into a definitive agreement for the purchase by Murata Electronics North America, Inc., a wholly-owned subsidiary of Japan-based Murata Manufacturing Co., Ltd. 

Murata Electronics will buy all the outstanding shares of Resonant (RESN) not owned by Murata for US$4.50 per share in an all-cash deal. It will pay a premium of 265.85% on the last closing price of RESN stock, which is US$1.23 on February 14. 

The deal will likely close in March, subject to customary closing conditions. After the transaction, Resonant will become the wholly-owned subsidiary of Murata. 

The acquisition will allow both companies to expand their business to new markets. 

The Austin, Texas-based Resonant has picked Stifel as its financial advisor and Centerview Partners LLC as its lead financial advisor. Mizuho Securities Co., Ltd. will act as an exclusive financial advisor for Murata.

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Investigation into suspected price manipulation

Amid the positive news, a law firm has initiated an investigation into suspected price manipulation in the planned transaction. 

The Wohl & Fruchter LLP's law firm is probing the acquisition to ensure the transaction is in the best interest of RESN shareholders, Wohl & Fruchter said in a press statement. The probe is drawing attention because not all business deals are subjected to an inquiry by a law firm. 

The subject of the investigation is a suspected price manipulation by Resonant directors, and whether all the information about the transaction were fully disclosed, said the release.  

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The deal needs shareholders' approval for closing the transaction, although the directors of both companies have already approved.   

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Resonant Financials

For the nine months ended September 30, 2021, the company booked a net loss of US$26.87 million or US$0.45 per share diluted, reflecting a 4.6% increase YoY in the per-share loss. 

Its revenue was US$1.65 million in the period against US$2.55 million in the same period in 2020. The accumulated deficit totaled US$177.8 million as of September 30, 2021.  

Its cash and cash equivalents were reduced to US$15.35 million as of September 30, 2021, from US$24.97 million as of December 31, 2020. 

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The Texas-based Resonant develops software and service platform to increase the efficiency in filters for radio frequency for mobile devices. The company went public in 2014, and its current market capitalization is US$282 million.

The stock fell 83% in one year at the closing price of US$1.23 on February 14, 2022.  

Bottomline

After the deal's announcement, Resonant's trading volume saw a massive jump in intraday trading. However, investors must apply due diligence before investing in the stock market.