Zoom has identified $ 14.7 billion (approximately Rs 1,09,280 crore) worth of issues dealing with call center software company Five9.
After its shares fell 29 percent just weeks after the announcement of the Zoom deal, it did not want to add money to its bid and rely solely on its share to pay for the Five 9 deal. Physical encounters will destroy its business as the Govt-19 epidemic is on the decline.
Five 9 shareholders voted for the deal last week.
Investment bankers and analysts said Zoom’s shares will remain volatile once investors establish what its business prospects are once the epidemic is over. This further reduces the chances of another acquisition target zoom stocks being accepted as the nearest currency, they said.
Zoom has almost no debt but until the end of July it had only $ 2 billion (approximately Rs. 14,865 crore) in cash to fund development efforts.
Wolf Research Analyst Alex Jugin says, “When Zoom returns to a more physical life we need to figure out how to keep some customers who have registered as unwanted personal subscribers to Zoom.
Zoom declined to comment.
Another hurdle that Zum’s acquisition could pose to the next company that attracts interest freeze is its relationship with China. U.S. prosecutors last year accused a former Chinese Zoom administrator of disrupting video conferences commemorating the 31st anniversary of Tiananmen Square at the request of the Chinese government.
The panel, led by the U.S. Department of Justice, said last month that it was examining the Five 9, which Zoom recommended, as “whether it endangers national security or law enforcement interests.”
Although five of the nine stakeholders voted in favor of the Zoom deal before the end of the review, analysts said the regulatory intervention exposed the risk of other acquisitions being pursued.
“The U.S. government is likely to provide more scrutiny for companies with engineering skills or other operations in China,” said Sujith Raman, a former U.S. deputy attorney general.
Activist Hedge Fund
Attempted to acquire Zoom Five 9, its call center software is used by more than 2,000 companies around the world to communicate with their customers, offering more products beyond its primary telecommunications. Without any convertible acquisitions, Zoom shareholders are likely to grow concerned about the company’s reliance on virtual encounters, whose popularity is at its peak, some investors said.
Diane McGeever, chief investment officer at investment firm AIDS Capital Management, said an activist hedge fund would take advantage of the situation and seek change by accumulating a stake in Zoom.
“Compulsory sales and event-driven funds can create an external valuation opportunity for the long-term investor, often with a short-term focus when a contract falls,” McGeever said.
There are plenty of examples of companies that have attracted the wrath of investors after starting the acquisition effort. The hedge fund DCI Fund Management, one of the largest investors in the Canadian National Railways, has called for the resignation of the railway chief executive following the failure of the $ 29 billion (approximately Rs 2,15,540 crore) acquisition attempt for Kansas City South.
Activist Hedge Funds Starboard Value LP
To be sure, Zoom’s stock may be expensive for some activist hedge funds, analysts said. It is also unclear whether Zoom will have an acquirer, something that some activist hedge funds could push.
Still, a failed deal could be interpreted by some investors as a signal to a company’s board that it could not open up much value, said Lawrence Elbham, co-chair of law firm Vinson & Elkins partner operating practice.
“This immediately makes their board seats vulnerable to an operational campaign,” Elbham said.
© Thomson Reuters 2021