On Sunday, I wrote about 888 Holdings (LON: 888), which rejected a 700 pounds offer from Playtech in July. That offer valued the company at about 700 million pounds, which is much higher than the current valuation of less than 350 million pounds.
Five9 (NASDAQ: FIVN) stock price jumped by more than 16% on Monday after Bloomberg reported that the company was exploring a sale. That report was notable because the company’s shareholders turned down a $14.7 billion offer from Zoom Video in 2021.
Today, Five9 is valued at less than $6 billion as its stock has plunged by more than 60% from its highest point in 2021. This means that the firm’s valuation has crashed by over $6 billion since Zoom (NASDAQ: ZM) walked away.
Therefore, a potential acquisition, if it happens, will ultimately give it a much valuation than what Zoom was prepared to offer. According to Bloomberg, Zoom is interested in resurrecting the offer for Five9.
FIVN stock price chart
Five9 lost a huge opportunity in 2021 when it rejected Zoom’s offer. For one, it was an unsolicited offer, meaning that it had room to negotiate with the acquirer. Now, it is Five9 that is seeking offers, it is at a disadvantage in terms of negotiations.
The offer comes at a time when Five9’s business is not doing well, as evidenced by its recent earnings. Its adjusted EBITDA came in at $41.3 million as its margin dropped by 60 basis points to 17.9%. Its gross margins dropped to 16.6% while its revenue growth was just 3%.
The company also offered a weak forward guidance as it expects its revenue to come in at $237.6 million. It cited the recent report by JPMorgan Chase, which estimated that discretionary credit and debit card spending.
Further, there are concerns about the virtual communication growth after booming during the pandemic. While hybrid working is still growing, demand for these solutions has not been all that strong. This explains why Zoom shares have crashed from $590 during the pandemic to $68.16.
The challenges by Five9 also remind me of Entain, the British company that owns brands like Coral and Ladbrokes. The firm rejected a $22 billion deal from DraftKings and a $11 billion offer from MGM. Today, the company has a market cap of less than 6 billion pounds and has severely underperformed Flutter Entertainment.
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