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Why Zendesk and Momentive Stocks Tumbled Today

By Daniel Sparks – Oct 29, 2021 at 12:12PM

Key Points

  • Strong third-quarter revenue from Zendesk wasn't enough to soothe investor concerns about the company's just-announced all-stock buyout of Momentive.
  • Momentive Global is the parent company of SurveyMonkey.
  • The two companies believe their businesses have complementary capabilities and can combine for improved efficiencies.

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A planned all-stock buyout is spooking both companies' shareholders.

What happened

Shares of software-as-a-service customer support specialist Zendesk (ZEN) and survey software company Momentive Global (MNTV 0.65%) both tumbled on Friday. The two stocks fell as much as 22.7% and 16.1%, respectively, though their shares were down 20.7% and 10.8% as of 11:18 a.m. EDT today.

The two tech stocks' declines come as investors digest the news that Zendesk plans to acquire the SurveyMonkey owner in an all-stock transaction.

Person holding head in distress while looking at computer in office.

Image source: Getty Images.

So what

After market close on Thursday, Zendesk reported better-than-expected third-quarter revenue and in-line earnings relative to the analyst consensus forecasts for the two metrics. While the quarter may have been solid, investors seemed concerned about management's willingness to buy Momentive in an all-stock deal.

The terms of the deal said Momentive shareholders would each get 0.225 shares of Zendesk. The press release noted that this valued Momentive at about $28 per share based on the 15-day volume-weighted average price of Zendesk shares.

"The companies' respective sizable customer bases and complementary capabilities are expected to provide significant opportunity for joint product adoption and increasing Momentive's enterprise traction," said Zendesk in a press release about the deal. "Zendesk will reinvest savings from scale efficiencies into compelling growth opportunities to support the combination." 

Now what

Of course, there's no guarantee the deal goes through. The press release said the transaction, which isn't expected to close until the first half of 2022, "is subject to approval by Zendesk stockholders and Momentive stockholders, the receipt of required regulatory approvals and other customary closing conditions."

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Zendesk. The Motley Fool has a disclosure policy.

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