Talk about a roller coaster ride.
Zoom, the video-conferencing company that was used by everyone to communicate around the pandemic, has decided not to acquire Five9, a provider of cloud-based customer service software. The all-stock deal was announced in July and was supposed to allow Zoom to tap into lucrative contact center markets. However, there were some major hiccups that led to today's decision.
First, Zooms shares have moved in a nearly straight line towards the sky in the past couple of years. The deal for Five9 which was valued at $14.7 million in July would have been significantly less today. Zooms shares traded at $360 per share on the day of the announcement. They are now trading closer to $260 pershare.
It was not helpful that Zoom revealed last week that a U.S. Justice Department-led Panel had been investigating the tie up over concerns that it might pose national security threats due to Zooms ties with China.
Eric Yuan, the founder of The American Foundation, is a naturalized citizen from America. He was born in China and immigrated to the U.S. in 1997 at the age of 27. We spoke with Yuan several years ago about how he had overcome many obstacles to accomplish this.
Zoom also stated last year that it had misrouted meetings through servers in China. It also shut down an account of an activist using the platform for commemorating China's Tiananmen Square crackdown. The company, which had previously stated that a significant part of its development team was in China (as it is with many multinational corporations), said afterwards that it wouldn't allow requests from the Chinese government for any impact on anyone other than mainland China.
The figurative nail in the coffin may have been a recommendation by Institutional Shareholder Service two weeks ago that Five9 shareholders vote against acquisition due to concerns about Zoom's slow growth.
This advice seems to have been taken into consideration, as Five9 today issued a news release stating that the merger plan was terminated through mutual agreement.
Zoom released its own announcement, which downplayed the whole episode. Yuan wrote in Whats next that Five9 offered a compelling way to offer integrated contact centers to customers. He adds that it was not the sole way to provide a compelling contact centre solution for our customers, and it was not the foundation of our platform's success.
The development was evidently expected in any case. The share prices of Zoom and Five9 barely rose after the news that the acquisition was cancelled.
