S1 Corporation (Nasdaq: SONE) jumped 21 percent Friday after the company received investments totaling $244 million.
Shares in the maker of financial services software were up 6 to 34 5/16 after the news, released after Thursday's bell, that the company will receive equity investments from five financial service providers. The stock crumbled earlier in May when lower-than-expected gross margins marred the company's first quarter report.
The $224 million will be used for general corporate purposes, including the company's mission to provide advanced access to emerging eFinance technologies.
Robertson Stephens reiterated a "buy" rating on the stock. "Cash is king and with the infusion of $244 million, S1 will have $326 million in cash of $5.60 per share on the balance sheet," noted Scott Appleby, analyst for Roberson Stephens.
The extra cash "is a huge competitive advantage" for S1, Appleby said, since rivals will have a harder time raising money because of the soft stock market. The deal "further validates S1's technology as the industry-leading platform," Appleby said.
Appelby set a price target of $65 to $70 on shares, stating that "S1's shares should at least trade to the average multiple of the peer group," Appleby said.
The organizations which will invest in S1 include affiliates of Zurich Financial Services Group, Allianz AG, FleetBoston Financial Corporation (NYSE: FBF), J.P. Morgan (NYSE: JPM) and State Farm Mutual Automobile Insurance Company. The financial services firms, which are already deploying S1's technology, said they plan to extend their relationship with the company.
Under the terms of the agreements, S1 will issue $244 million in shares of newly authorized series D convertible preferred stock. The series D convertible preferred stock votes with S1's common stock, is convertible into an aggregate of 7,145,052 shares of S1 common stock at an effective price of $34.15 per share.
S1's top competitors include First Data (NYSE: FDC) and Digital Insight (Nasdaq: DGIN) according to Hoover's Online.