Talk about a ride on a roller coaster.
The acquisition of Five9, a provider of cloud-based customer-service software, by Zoom, the video conferencing business that became everyone’s primary method of contact at work during the epidemic, has been called off. Although it was anticipated that the all-stock transaction, announced in July, would allow Zoom to enter the lucrative contact center industry, a few significant setbacks along the way appear to have contributed to today’s decision.
First, the price of the deal for Five9, which was estimated at $14.7 billion in July, would have been much lower today because Zoom’s shares, which practically rose in a straight line over the previous two years, have recently been under pressure. (Zoom’s shares were trading at about $360 per share the day the deal was announced; they are currently trading at more or less $260 per share.)
The fact that Zoom revealed last week that a panel led by the U.S. Justice Department was looking into the partnership because of worries that it would pose threats to national security given Zoom’s connections to China didn’t help matters much.
Eric Yuan, the founder, is a naturalized American citizen who was born in China and immigrated to the country in 1997 when he was 27 years old. (A few years ago, we talked about overcoming several obstacles to do this.)
Additionally, Zoom admitted last year that some meetings had been inadvertently routed through Chinese servers, and that it had terminated the account of an activist who had been using the platform to remember the Tiananmen Square crackdown in China. The company then declared it would not allow requests from the Chinese government to have an influence on anyone outside of mainland China, despite having previously acknowledged that a sizeable portion of its development staff is based in China (as is typical for many global corporations).
However, the suggestion made two weeks ago by the proxy consulting company Institutional Shareholder Service that Five9 shareholders vote against the acquisition due to worries over Zoom’s sluggish growth may have been the proverbial final nail in the coffin.
That advise appears to have been taken to heart as Five9 today announced that the two firms have mutually agreed to end their merger plans. Evidently, that was also expected. The share prices of Zoom and Five9 barely changed when it became public knowledge that the acquisition had been scrapped.