Why Unity Stock Plunged Today Whereas ironSource Stock Skyrocketed

Shares of Unity Software (NYSE: U) plunged on Wednesday morning, but shares of ironSource (NYSE: IS) skyrocketed. And believe it or not, these moves were for the same reason. Unity and ironSource are merging. As of 10 a.m. ET, Unity was down by 13%, while ironSource was up 52%.

While the companies are calling this a merger, it's more like Unity is acquiring ironSource. The all-stock deal values ironSource at $4.4 billion. The market capitalization of ironSource was around $2.3 billion prior to the announcement, so Unity is paying a significant premium for the company.

This explains why ironSource rose so much, and also why Unity stock is down. As of Tuesday's close, Unity's market cap was around $12 billion, so a $4.4 billion deal is roughly one-third of Unity's size. Naturally, an all-stock deal of this magnitude will put downward pressure on shares.

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Source Fool.com