Why Super Micro Computer Stock Triumphed on Thursday

Super Micro Computer (SMCI 10.18%) is expanding, at least in terms of its retail footprint. Typically, when a company ponies up to buy more property, it means it’s preparing for an upswing in business.

That’s the way the market seemed to take the news on Thursday, as they pushed up Super Micro’s stock by more than 10% on the day. That figure was well above the 1.3% increase of the S&P 500 index.

Snapping up some expensive real estate

In a regulatory filing, Super Micro divulged that it formally entered into an agreement to buy nearly 20 acres of land and almost 294,000 square feet of buildings and improvements near its Silicon Valley headquarters. The specialty tech company is to pay $80 million for this real estate from its counterparty, Caracol Property Owner, subject to certain adjustments that it didn’t specify.

Super Micro will also inherit discretionary entitlements, which are currently held by Caracol, for a redevelopment of the property. They cover a potential redevelopment involving seven office buildings comprising around 1.9 million square feet in space. Super Micro could also opt to develop a pair of parking structures totaling approximately a combined 1.6 million feet.

The company said the deal, which covers a portion of the property that it currently leases for warehouse space, should close at some point this month.

A good sign for the future

Real estate can be expensive, particularly in the tech Mecca that is Super Micro’s home city of San Jose. Investors were smart to catch on to this piece of news and infer that the company’s business is expanding along with its real estate holdings.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Super Micro Computer. The Motley Fool has a disclosure policy.

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