Monday's Headlines: Zendesk to be Bought Out by Investor Group
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Zendesk (ZEN) +28.0%
Wynn Resorts (WYNN) +12.1%
Smartsheet (SMAR) +10.0%
Farfetch (FTCH) +9.0%
Yext (YEXT) +8.8%
Moving Down ⬇️
Hain Celestial (HAIN) -2.5%
Duluth Trading (DLTH) -2.3%
GoPro (GPRO) -1.5%
Here are the stories that you need to know ahead of market-open today, Monday, the 27th of June.
Zendesk to be Bought Out by Investor Group 🤝
Customer service software company Zendesk (ZEN) has agreed to be bought out by an investor group for $10.2 billion. The deal values Zendesk at $77.50 a share, which was a 34% premium on the company’s closing stock price on Thursday. Zendesk was up 28% on Friday after the announcement.
Led by private equity funds Permira and Hellman & Friedman, the deal is expected to close in the fourth quarter of 2022. Once finalized, they will take the company private.
The acquisition is providing closure to what has been a chaotic year for Zendesk and its shareholders. The timeline looks something like this:
- Late 2021: Activist investor Jana Partners starts putting internal pressure on the company through a series of complaints.
- February 10, 2022: Its board rejected a buyout offer of $17 billion from a collection of private equity investors, believing it undervalued the business.
- February 25, 2022: The planned acquisition of SurveyMonkey’s parent company Momentive for $4.1 billion is called off after 90% of shareholders voted to reject the deal.
- June 9, 2022: After a strategic review, Zendesk has committed to remaining an independent, public company.
- June 24, 2022: Just two weeks after its commitment to remain an independent company, Zendesk agreed to be acquired by a group of private equity investors for $10.2 billion, 60% of the offer it turned down just four months earlier.
Putting an end to the disastrous chapter, the all-cash deal means Zendesk shareholders will receive a payout of $77.50 for each share they own once the deal is finalized at the end of the year. With the stock trading at around $75 currently, Wall Street is confident the acquisition will go through, meaning investors can cash out early at a slight discount if they so choose, or wait until the buyout goes through in Q4.
Robinhood on the Brink 💵
After a more-than-year long investigation, the House Financial Services Committee concluded Friday that Robinhood was in far worse condition in January 2021 than it revealed publicly.
In the midst of the meme stock craze and GameStop heading to the moon, Robinhood teetered dangerously towards default when its daily collateral deposit requirement suddenly skyrocketed. The Depository Trust and Clearing Corporation (DTCC), which clears and settles all U.S. equities transactions, notified Robinhood on January 28 that it owed $3.7 billion. This amounted to $3 billion more than the deposits it had with the clearing house at the time.
Robinhood was only able to avoid default via “a discretionary and unexplained waiver” granted by the DTCC following discussions between the agency and the brokerage.
This story is in stark contrast to the one presented by Robinhood CEO Vlad Tenev, who testified in February 2021 that the company was “always comfortable with its liquidity.” Internal memos presented in the House’s report revealed that Tenev was made aware the brokerage was facing major operational concerns. Chief operating officer, Gretchen Howard, sent an email to Tenev stating the company needed to enact “extensive crisis management”. She also expressed concern for what would happen if the situation became public.
The House Committee concluded that:
“Robinhood’s risk-management processes did not work well to predict and avert the risk of default that materialized.”
Time will tell if this will result in more regulation and scrutiny from the federal government moving forward, potentially limiting Robinhood’s ability to expand and offer new services.
Polestar Finally Goes Public 🚘
Despite a relatively muted year for new market debutants, electric vehicle (EV) company Polestar began trading on the Nasdaq exchange on Friday after months of anticipation from investors.
Polestar is a Swedish EV manufacturer that specializes in performance cars. It’s currently majority-owned by fellow Swedish automaker Volvo following a purchase in 2015. Last year, it announced that it had signed an agreement with Gores Guggenheim, Inc. — a special purpose acquisition company — to seek to go public.
This merger was finally approved by shareholders last week, paving the way for Polestar to begin trading publicly on Friday under the ticker symbol PSNY. It finished the day up 15% from the SPAC’s closing price pre-merger.
Polestar has relatively limited offerings so far, with only 1,500 models of its first vehicle — the Polestar 1 — reportedly made worldwide. Its current car, the Polestar 2, is the first car of any kind to have an operating system exclusively powered by Google. Sales have been steadily growing, with year-over-year growth in 2021 of 185% seeing the firm deliver over 29,000 vehicles.
The EV market is a notoriously competitive space, with industry stalwarts like Tesla currently holding off the advances of legacy automakers such as Volkswagen and Ford. However, Polestar is better placed than most newcomers to make a dent in the market. A clear footprint in both Europe and China — thanks to its current ownership — and actively increasing production and sales all point to an increased market share moving forward.