Chatter surrounding the then-rumored buyout of Slack Technologies (WORK) by salesforce.com (CRM 9.36%) lifted share prices of many cloud computing stocks in November 2020. Slack led the charge with a gain of 67.6%, according to data from S&P Global Market Intelligence. Sumo Logic (SUMO) followed close behind with a one-month return of 51.6%. MongoDB (MDB -1.13%) posted a 25.8% jump in 30 days. Salesforce investors were less excited by the deal rumors, leaving the stock far behind with a November gain of just 5.8%.
If cloud-based business collaboration specialist Slack could find a buyer even though its stock price had nearly doubled year to date, other companies in that explosive sector might be in line for similar exit deals. That's the logic behind these big jumps.
Alternative database software specialist MongoDB would be a more digestible meal for a deep-pocketed buyer, sporting a $16 billion market cap compared to Slack's $24 billion cap. Log analytics expert Sumo Logic is even smaller at $2.1 billion, and its management team has a deep history of orchestrating big-ticket buyout exits for fast-growing technology companies.
Sumo went public less than two months ago, so the rumor mill hasn't had time to crystallize sophisticated buyout ideas around that stock yet. MongoDB, on the other hand, has been a constant target of buyout speculation since 2018. Suggested buyers include traditional database giant Oracle (ORCL) and centennial technology giant IBM (IBM 1.38%).
Slack and salesforce sealed their deal on Dec. 1. Roughly 40% of the deal's financing comes from issuing Salesforce shares to Slack's stockholders. The price tag currently stands at $21.8 billion, subject to changes in Salesforce's share prices. That's a 50% premium to Slack's market value before the buyout rumblings started on Nov. 25. One enormous deal can uncork a tidal wave of consolidation across the target company's market sector, and the Slack deal is definitely large enough to inspire copycats, speculators, and adventurous investors in the cloud computing market.
It's no surprise to see potential buyout targets catching a ride on Slack's coattails under these circumstances. Both Sumo and MongoDB are high-powered growth stocks with bright futures. As a MongoDB shareholder myself, I would rather see the company disrupting the database market on its own rather than becoming a small cog in a massive business like Oracle's. But it would still be hard to say no if somebody wanted to pay a 50% premium for my MongoDB shares.