Five9 shareholders told not to accept Zoom’s offer due to stock volatility

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Five9 Inc. shareholders are told not to approve Zoom Video Communications Inc.’s offer to acquire the company because stock volatility made the deal less attractive, according to a new recommendation from Institutional Shareholder Services Inc .

In July, Zoom offered to buy cloud-based contact center software company Five9 in a $ 14.7 billion stock transaction. As part of the offer, Five9 FIVN,
+ 3.09%
shareholders will receive 0.5533 of a Zoom ZM,
+ 2.15%
share for each Five9 share they own.

ISS noted that Zoom’s shares fell nearly 17% the day after the company’s August 30 earnings report, where Zoom’s outlook fell below Wall Street estimates and sales growth slowed. As a result, ISS said the initial offer involved an offer of $ 200.28 per Five9 share, while the current exchange rate involves $ 155.72 per share.

Zoom shares opened at $ 279.79 on Friday, while Five9 shares opened at $ 172.55. At those prices, Zoom’s deal values ​​Five9 at $ 154.81 per share.

While Five9’s board of directors recommends the deal, ISS believes shareholders are not being fairly shaken up, noting that during negotiations, “the parties seemed to agree that FIVN’s take-out value was around 210. $ per share “.

“The rationale for the transaction appears strong, particularly given the complementary nature of FIVN and ZM’s offerings, and the fact that the combined company would have access to a much larger addressable market,” ISS said in a report. “However, the all-stock deal exposes FIVN shareholders to more volatile stock whose growth prospects have become less attractive as the company moves towards a post-pandemic environment.”

ISS even cited a lack of investor enthusiasm following Zoom’s recent Zoomtopia 2021 user conference, saying that “new technologies and services have not revived the action and apparently have not succeeded. to alleviate the concerns of its shareholders regarding continued business attrition “. Shares closed 3.7% lower on the day Zoom announced new services at the conference on Monday.

Over the past 12 months, Zoom shares have fallen 31%, while Five9 shares have gained 45%. In comparison, the S&P 500 SPX index,
-1.00%
gained 32% and the Nasdaq COMP composite index,
-1.18%
increased by 38%.


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