Why Zoom Video Communications Was Down on Monday

The company's latest acquisition isn't exactly cheap.

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Woman on Zoom on computer

Image source: Getty Images

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Zoom Video Communications (NASDAQ: ZM) was trading down by more than 2% in late afternoon action in the US on Monday. This followed the announcement of the video conferencing specialist's latest acquisition.

So what

On Sunday, Zoom announced it had signed a definitive agreement to acquire cloud-based contact centre software developer Five9 (NASDAQ: FIVN). Zoom said the transaction is valued at $14.7 billion. Thankfully the tech company's owner-to-be won't have to feverishly raise cash for the deal, as it's being effected entirely in Zoom stock.
Woman participating in video conference with a laptop.

Image source: Zoom Video Communications.

"Enterprises communicate with their customers primarily through the contact centre," Zoom CEO Eric Yuan said. "We believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers." Zoom is touting the complementary nature of the Five9 acquisition, claiming it will present cross-selling opportunities (both for its own customer base and that of Five9 as a unit) when paired with its Zoom Phone offering.

Now what

The boards of directors of both Five9 and Zoom have approved the buyout deal. It is subject to approval by the latter's shareholders. Zoom said the purchase should close in the first half of calendar year 2022. As is common with big-ticket buys, the share price of the acquirer is slumping on the news while the acquired company's is rising (by almost 6%, at last glance). What might also be concerning Zoom investors is the company's lack of a forecast on how Five9 might affect its financials and operations.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Eric Volkman has no position in any of the stocks mentioned.  The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Zoom Video Communications. The Motley Fool Australia has recommended Zoom Video Communications. The Motley Fool owns shares of and recommends Five9. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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