GitLab Shares Surge 9% Following Reports of Potential Sale

GitLab Inc (NASDAQ:GTLB) shares surged over 9% on Wednesday following a Reuters report that the company is exploring a sale after attracting acquisition interest. The report, which cites unnamed sources, indicates that the U.S. provider of cloud-based software development tools, whose investors include Alphabet, is working with investment bankers on a potential sale process.

Valued at approximately $8 billion, GitLab has reportedly garnered interest from several peers, including cloud monitoring firm Datadog. However, any potential deal is said to be weeks away, and no agreement is certain at this point. Alphabet holds a 22.2% voting stake in GitLab through its venture capital arm.

Analysts at Needham & Company commented positively on the news, noting that GitLab has "long been viewed as an attractive acquisition candidate." They acknowledged that while AWS or Google Cloud are often seen as more likely buyers, a tie-up with Datadog could be beneficial. Such a deal would allow GitLab to maintain its cloud neutrality while gaining the backing of a financially stronger organization within a broader platform.

The analysts also highlighted that a Datadog acquisition would likely face fewer regulatory hurdles. They pointed to GitLab's recent 8-K filing, which included amendments ensuring management's equity awards are not subject to cancellation in connection with a corporate transaction.

Needham noted a 16% increase in GitLab's share price over the past three weeks, suggesting that the market is already beginning to factor in a potential acquisition premium.