Why Is Zoom’s Stock Dropping?

Zoom’s Acquisition Plans For Five9 Have Been Scrapped

Zoom’s plans to quickly expand into the cloud center space have been dealt a major blow following the scrapping of its Five9 merger.

Just three days ago I found myself waxing lyrical about Zoom (NASDAQ: ZM) and how its shareholders shouldn’t feel threatened by Microsoft Teams, whilst specifically referencing its Five9 merger.

Well, haven’t I got egg on my face? 

What happened to Zoom’s Five9 merger?

The deal has gone the way of the dodo — that is, if the dodo had a dedicated board of shareholders who thought their existence simply shouldn’t continue.

And that’s what basically happened. Despite Zoom playing the role of a scorned lover and calling it a “mutual agreement”, reports indicate that the $14.7 billion all-stock offer for the cloud contact software center was rejected by Five9 shareholders. 

There are a number of reasons for this rejection, including the fact that Zoom shares have lost almost a quarter of their value since the deal was announced in July, as well as ongoing antitrust investigations into the agreement.

So, is this a disaster for Zoom?

Not really. Sure, it slows down Zoom’s plans to enter the call-center-as-a-service (CCaaS) market — does everything need an ‘aaS’ these days? — but CEO Eric Yuan appeared unperturbed at a press conference last night, stating:

“It [the deal] was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact center solution.”

And, as we’ve mentioned many times before here at MyWallSt, mergers and acquisitions actually often end up being bad news for investors, so perhaps this is a case of a dodged bullet?

Either way, life will go on for Zoom, which is still experiencing fantastic growth and expects to bring in record revenue of $4 billion and earnings of $4.77 per share this fiscal year. So, no need to panic sell on one failed merger.

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