Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Synchronoss Technologies Are Slumping Today

By Timothy Green - Oct 18, 2017 at 12:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company has concluded its strategic alternatives process by selling a business it acquired earlier this year. Investors don't seem thrilled with the drama.

What happened

Shares of Synchronoss Technologies (SNCR -0.86%) tumbled on Wednesday, one day after the company announced that it was selling its Intralinks business for roughly $1 billion. This sale ends Synchronoss' strategic alternatives process after a year of drama that has sent the stock on a roller-coaster ride. At 11:15 a.m. EDT, Synchronoss stock was down about 11.5%.

So what

Synchronoss has agreed to sell its Intralinks business to Siris Capital Group. Under the deal, Siris will also make a $185 million investment in Synchronoss in the form of convertible preferred stock. This stock will initially be convertible into 19.8% of Synchronoss' common stock.

A man holding his head as he watches a falling stock chart.

Image source: Getty Images.

Synchronoss CEO Stephen Waldis, in laying out the rationale for the deal, said, "These transactions would provide Synchronoss with a strong balance sheet and the capital flexibility to pursue a more focused business strategy that builds on our existing footprint in Cloud, Messaging, and Digital Transformation while executing on key growth vectors in each of these areas."

Investors may be reacting negatively to the sale of Intralinks because it was its acquisition that preceded all this drama. Here's a basic timeline:

  • Jan. 19: Synchronoss completes $821 million tender offer for Intralinks. As part of the deal, Intralinks CEO Ron Hovsepian becomes CEO of Synchronoss.
  • April 27: Synchronoss announces disastrous preliminary first-quarter results. Hovsepian and CFO John Frederick step down just a few months after taking the helm.
  • May 15: Synchronoss delays its first-quarter results due to the audit committee of the board of directors reviewing certain transactions.
  • June 13: Synchronoss discloses in a Securities and Exchange Commission filing that it will restate its financial statements for 2015 and 2016.
  • July 6: Synchronoss announces that it is considering strategic alternatives, with a full range of options, including a sale of the company, on the table.
  • Oct. 17: Synchronoss concludes the strategic alternative process with the sale of Intralinks for $1 billion.

Now what

It's still not entirely clear what went wrong with the Intralinks acquisition. The company is shedding the business and putting this ordeal behind it, but investors simply aren't buying the story. A major acquisition going sour so quickly has no doubt left a bad taste in their mouths.

Synchronoss will get an infusion of cash from this deal. However, there are still plenty of questions left unanswered.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Synchronoss Technologies, Inc. Stock Quote
Synchronoss Technologies, Inc.
SNCR
$1.15 (-0.86%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.