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Zoom's $14.7B Five9 deal is terminated
The Big Story 💥
Five9 shareholders voted down the call center software firm's $14.7 billion sale to Zoom on Thursday, a major blow to Zoom's plan to expand its offerings following its pandemic boom.
The termination of what would have been Zoom's biggest-ever acquisition comes after proxy advisory firm Institutional Shareholder Services (ISS) and Glass Lewis earlier this month recommended that Five9 shareholders vote against the deal, citing growth concerns and dual-class shares.
Under the deal terms announced in July, Five9 shareholders would have received 0.5533 Zoom share for every Five9 share. The terms implied a 12.8% premium over Five9's market price and valued the company at $14.7 billion.
Since then, Zoom's stock has dropped over 25% as the virtual conferencing giant reported slower growth on its second-quarter earnings call.
San Ramon, California-based Five9 said the merger agreement did not receive enough approval votes from its shareholders, and it will continue to operate as a standalone publicly traded company.
Five9 presented an attractive means to bring to customers an integrated contact center offering, Zoom CEO Eric Yuan said on Thursday.
The company said it would launch Zoom Video Engagement Center, its cloud-based contact center solution, in early 2022.
Five9 said it would continue the partnership with Zoom that was in place prior to the announcement.
But with rapid vaccination and life coming back to normal, Zoom was looking for revenue sources beyond its core video conferencing business, which faces stiff competition from rivals Microsoft Corp, Cisco Systems Inc and Salesforce's Slack.
Five9's shares, which gained as much 19.3% since the deal was announced in July, fell 1.1% to $157.9 in extended trading on Thursday.
Overnight Action 😴☕
Asian stocks and U.S. futures started October on the back foot, after overnight losses in the S&P 500 capped its biggest monthly selloff since March 2020.
Shares slumped in Japan and Australia, and a gauge of Asian stocks hit its lowest in more than a month. U.S. and Europe futures retreated.
China began a week-long holiday and Hong Kong’s market is shut Friday. U.S. benchmarks fell Thursday even after confirmation that the House passed a nine-week spending bill to avert a U.S. government shutdown.
The S&P 500 closed at the lowest level since July, extending its September losses to almost 5%. Economically sensitive companies like industrials and financials were among the worst performers.
Treasuries edged higher, with the 10-year yield dipping below 1.50%. The dollar added to gains for the week. Crude oil fluctuated after a tumultuous session during which China was said to order its top energy companies to secure energy supplies at all costs amid shortages, prompting the White House to reiterate its own concerns over rising prices.
After a long stretch of gains for the U.S. stock market this year, September was the month when percolating investor anxiety finally came to a head, forcing all three major indexes lower.
Looking ahead to the fourth quarter, some strategists and investors say they expect cyclical and small-cap stocks to outperform, especially if rising bond yields damp the shine of growth stocks.
Shares of growth companies, including large tech stocks, tend to perform better in low-yielding environments because investors have more incentive to buy shares and await higher profits in the future.
Top 5 Moves 🆕📰
1. Singapore grants DBS crypto license
Singapore granted licenses to DBS Bank Ltd. and Australian cryptocurrency exchange Independent Reserve to offer digital payment token services, building on the city-state’s status as a crypto hub. The two firms add to Singapore’s expanding activities in cryptocurrency as the island ramps up integrated financial services for Bitcoin and other major digital assets such as trading, listing, tokenization and custody. The approval for Southeast Asia’s largest lender is seen as key to show how the MAS will regulate the sector that’s seen as risky and open to money laundering.
2. Powell has no intention of banning crypto
Bitcoin’s Thursday gain saw it bouncing off its 100-day moving average line and the coin looks to be forming a base around $40,000. Those are two developments that many chartists would consider positives. Its next test is the 50-day line, which currently sits around $46,500. Meanwhile, Federal Reserve Chair Jerome Powell said in a Congressional hearing Thursday that he had “no intention” on banning cryptocurrencies. He did, however, add that stablecoins might be appropriate for regulation.
3. German inflation hits 29 year high 4.1%
German inflation hit 4.1 per cent in September, its highest level for 29 years, prompting some economists to question whether central bankers are right to assume the surge in prices is only temporary and will disappear next year. The last time inflation in Germany was as high, Helmut Kohl was still chancellor, the Deutschemark was still in use and the country had only reunified a couple of years earlier, sending prices up sharply in the east. The rise in German inflation, which was up from 3.4 per cent in August, mirrors a similar rise in Spanish inflation to a 13-year-high of 4 per cent in September. French inflation data, which was also reported on Thursday, rose less than expected but still hit a decade-high of 2.7 per cent.
4. China orders energy firms to secure supplies
China's top state-owned energy companies have been ordered to ensure there are adequate fuel supplies for the approaching winter at all costs, a report said Friday, as the country battles a power crisis that threatens to hit growth in the world's number two economy. The power crunch prompted banks Nomura and Goldman Sachs to this week cut their growth forecasts for China this year as they expect more disruptions to supply chains and production. Factories that supply multinationals such as Apple and carmaker Tesla are among those affected and told to halt production.
5. Dollar index hits one year high
The US dollar on Thursday traded at its strongest level in a year against major currencies as traders banked on persistent inflation driving the Federal Reserve closer to its first pandemic-era interest rate rise. The dollar index, which measures the US currency against six others including the euro and British pound, hit its highest level since September last year, following days of choppy trading after central bank officials signaled the end of ultra-supportive monetary policies.
Crypto Outlet 🐳
Visa's master crypto plan: they want to build a universal hub to exchange stablecoins and central bank digital currencies. The goal would be to establish a system to facilitate exchanges for the next chapter of our currency history.
China's latest Bitcoin ban might be bullish for the coin. Indeed, when this last happen in 2017, the coin had dropped 30% before reaching an all-time high in the following weeks. History does not always repeats itself but sometimes, it rhymes.
41k might be the new support level for Bitcoin. Crypto analysts also suggested that breaking $43,800 would mean that the current correction is over.
Ark is selling Tesla shares after its outperformance
Cathie Wood sold nearly $270 million worth of Tesla shares as the bond sell-off is hitting rate-sensitive stocks. Wood’s Ark Investment Management offloaded more than 340,000 Tesla shares across three exchange-traded funds on Tuesday, according to the firm’s daily trading update. Some 11% of the famous ARK Innovation ETF (ticker ARKK) is still betting on Elon Musk’s company.
While we have seen a recent uptick in fintech stock performances for some, underperformance has been a common thread amongst online lenders in the past. Which fintech group merits your attention most?
The US government is approaching its debt ceiling, raising the prospect of the US defaulting on its debt if the limit is not raised. Markets have looked through it in the past. Might this time be different?
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