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 when 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.
Zoom also said last year that it mistakenly hosted some meetings through servers in China and closed the account of an activist who used the platform to commemorate China’s Tiananmen Square raid. 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 over 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”. Zoom released its own announcement separately, downplaying the importance of the failed deal.
With the title “What’s next”, Yuan writes about Five9 that it is “an attractive means of offering our customers an integrated contact center offering. Nevertheless, “he adds,” this was neither the basis for the success of our platform nor the only way for us to offer our customers a convincing contact center solution. “
Either way, the development was obviously to be expected. When news broke that the acquisition was not complete, Zoom and Five9’s share prices barely moved.