Zoom’s stock drop likely nixed Five9 deal, say analysts

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Oct 1 (Businesshala) – A drop in the stock price of Zoom Video Communications Inc. (ZM.O) limited its ability to sweeten an almost $15 billion all-stock offering for call center software firm Five9 (FIVN.O) done and proceeded with the deal. collapse, Wall Street analysts said on Friday.

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Five 9th shareholders voted a sale to Zoom on Thursday, denting the company’s efforts to diversify its offerings as growth in its virtual conferencing business slowed after a boom during the pandemic.

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While some analysts expected Zoom to raise its offer to address five shareholder concerns about the price, others said that the nearly 30% drop in Zoom’s shares since July only dampened prospects due to slowing growth. Gave.

Under the terms of the deal, Five9 shareholders will receive 0.5533 Zoom shares for each share. The terms then implied a 12.8% premium over the market value of Five9.

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Jefferies analyst Samad Samana said in a note to clients, “Given the small premium and all-stock structure, the deal was viewed negatively from the outset.” “ZM’s stock is down 28% since the announcement and has only complicated the issues and possibly even made it difficult to revise the terms.”

The deal – which when completed will be Zoom’s biggest purchase ever – was also opposed by shareholder proxy advisory firms ISS and Glass Lewis. Five 9 shareholders voted against the deal, citing growth concerns and dual-class shares that the firm recommended.

Analysts at Piper Sandler said, “While we think the deal made strategic sense for both companies over the long term, the convertible deal involving volatile (Zoom) shares is a financially attractive deal for (five 9) shareholders at the moment.” was not.”

Analysts at Barclays blamed the drop in Zoom’s share price and possible regulatory scrutiny for the fall in the deal.

A US Justice Department panel was reviewing the deal over potential national security concerns, although analysts said it was unlikely the deal would end as a result.

Analysts at JPMorgan said, “(Our) conversations, particularly with event-driven investors, believe that Five9 was important enough for Zoom that they will eventually rival Five9’s offer.”

“Obviously, the recent drop in stock prices for premium valuation software stocks further complicated the current situation.”

Shares of Zoom rose 1.6% to $265.79 in premarket trading, while Five9 shares fell nearly 3% to $155.

Reporting by Aniruddha Ghosh in Bengaluru; Editing by Sachin Ravikumar and Sriraj Kalluvilla


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