Key points:
- The Zendesk (ZEN) stock price rallied 30% after a $10.2bn takeover.
- Unfortunately, the firm had turned down a $17 billion offer in February.
- Today’s events should act as a warning to other companies.
The Zendesk Inc (NYSE: ZEN) stock price rallied 30% today after the company’s board announced that it had accepted a $10.2 billion takeover offer from a private equity consortium led by Permira and Hellman & Friedman.
In a sad turn of events, Zendesk had rejected a $17 billion takeover offer from another private equity group in February this year. At the time, the company said that the deal significantly undervalued the company, which was reeling from the success of its expansion into Latin America.
Also read: The Best Cheap Tech Stocks Under $10.
However, it didn’t take long for the company’s fortunes to turn for the worse as its shares fell from a high of $130.73 in mid-April to trade just above $50 earlier this week before today’s announcement. Like many other tech stocks, Zenddesk has suffered from the macro changes in the stock market as investors favoured value stocks over growth stocks.
The record-high inflation combined with the Federal Reserve’s rate hikes has triggered a broad stock market selloff that will continue until the Fed changes its monetary policy stance and decides to pause its rate hikes.
Zendesk provides essential customer service (CX) tools to many customers and has been growing its market shares since being founded in 2007 and listing on the NYSE in 2014. The company expected to keep expanding its customer base by expanding into new markets such as Latin America, which is why it rejected the earlier offer.
The private equity consortium led by Permira and Hellman & Friedman offered to acquire all outstanding Zendesk shares for $77.50 each, representing a 30% premium to yesterday’s closing stock price of 457.92.
Zendesk’s acquisition should be a cautionary tale for investors and the management teams of public companies that may overvalue their firms and miss out on good deals, only to be forced to accept a lower bid later on due to a change in their circumstances.
Now that Zendesk has accepted the $10.2 billion deal, which is expected to close in Q4 2022, Zendesk will become a private company again.
*This is not investment advice. Always do your due diligence before making investment decisions.
Zendesk stock price.
The Zendesk stock price soared 29.98% to trade at $75.29, rising from Thursday’s closing price of $57.92.