When a public company offers to acquire another, it is quite usual for the offer to be at a premium to the current stock price of the target company.

What happens when a stock for stock acquisition of a public company is announced?

In this post I will explain why the decline has little to do with investors reaction to the quality of the acquisition. The reason for the inevitable next day decline of the acquirer’s stock can be misunderstood. If the acquisition is a stock for stock transaction (as the Zoom one is), the acquirors stock will usually decline in price right after the announcement of the deal. It’s here…but is different than originally planned! Several recent M&A events have motivated me to try to explain some basics on what happens to associated stocks in such a situation, the most recent being the Zoom acquisition of Five9. The company joined the NASDAQ-100 stock index on April 30, 2020.īeginning in early 2020, Zoom's software usage saw a remarkable global increase after quarantine measures were adopted in response to the COVID-19 pandemic.I promised a new post within 3 weeks of the last one. The company first became profitable in 2019, and completed an initial public offering that year. Zoom's revenue growth, and perceived ease-of-use and reliability of its software, resulted in a $1 billion valuation in 2017, making it a 'unicorn' company. It provides videotelephony and online chat services through a cloud-based peer-to-peer software platform used for video communications, messaging, voice calls, conference rooms for video meetings, virtual events and contact centers, and offers an open platform allowing third-party developers to build custom applications on its unified communications platform.Įric Yuan, a former Cisco engineer and executive, founded Zoom in 2011, and launched its software in 2013. is an American communications technology company headquartered in San Jose, California.

Zoom stock price in january 2020