Talk about a roller coaster ride.
Zoom, the video conferencing company that became the main work communication tool during the pandemic, will no longer acquire Five9, a maker of cloud-based customer service software. While the all-stock deal announced in July should enable Zoom to enter the lucrative contact center market, it appeared that some major problems led to today’s decision.
First, Zoom’s stocks, which have moved almost in a straight line in the sky for the past few years, have come under pressure lately, so the deal for Five9, valued at $ 14.7 billion in July, is significantly less today would have failed. (On the day the deal was announced, Zoom’s shares were trading at around $ 360 each; now they’re trading at near $ 260 per share.)
It certainly didn’t help that Zoom announced last week that a panel led by the U.S. Department of Justice was investigating the link over concerns that it could create national security risks given Zoom’s links with China.
Founder Eric Yuan is a naturalized American citizen who was born in China and moved to the United States in 1997 at the age of 27. (A few years ago we talked to Yuan about overcoming numerous hurdles to do this.) Zoom also said last year that it had mistakenly hosted some meetings through servers in China and that it had blocked the account of an activist who used the platform to commemorate China’s raid on Tiananmen Square. Thereafter, the company, which had previously said that a significant portion of its development team is in China (as is the case with many multinational corporations), announced it would not allow inquiries from the Chinese government to affect anyone outside mainland China.
Still, the figurative nail in the coffin two weeks ago may have been a recommendation from proxy advisory firm Institutional Shareholder Service that Five9 shareholders vote against the acquisition because of concerns about Zoom’s slowing growth.
This advice appears to have been heeded, as Five9 released a press release today that the merger plan between the two companies was “mutually agreed”. It was obviously expected too. When the news broke that the deal was over Zoom and Five9 stocks barely moved.