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How Did The Zendesk (ZEN) Stock Drop 19% Pre-Hours?

In pre-market trading hours on Friday, Zendesk Inc. (ZEN) was down -18.49% at $97.0. The stock declined -2.98% to end the last trading session at $119.01. On average, the price range of the company’s shares was $117.76 to $123.06. Zen traded 4.4 million shares, above its 100-day daily average of 1.34 million shares. In the last five days, Zen shares have dropped by -11.21%, but they have gained 2.36% in the past month. Moreover, the price-to-cash-flow ratio stood at 111.56. Zen stock plunged despite encouraging financials, but an acquisition deal might be to blame for the decline.

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What has been the performance of ZEN?

By enabling businesses around the world to provide customer service online, Zendesk started the customer experience revolution in 2007. With over 100,000 brands and hundreds of millions of customers, ZEN offers great service everywhere. ZEN connects brands with customers through telephony, chat, email, messaging, social channels, communities, the internet, and help centers. Its products are lovingly crafted to be loved by customers. Founded in Copenhagen, Denmark, Zen was built and grown in California, taken public in New York City, and now employs more than 5,000 people worldwide.

Upon releasing its third quarter financial results, Zendesk issued a Shareholder Letter on the company’s investor relations website at https://investor.zendesk.com.

Results for the Third Quarter 2021:

  • The revenue generated by ZEN was $347.0 million, an increase of 32% over the previous year.
  • ZEN reported a GAAP net loss of $54.4 million or $0.45 per share for the quarter ended September 30, 2021.
  • ZEN generated a non-GAAP net income of $21.7 million, or $0.18 per share and $0.17 per diluted share.

Zendesk and Momentive have signed a definitive agreement. ZEN will acquire Momentive as well as the iconic SurveyMonkey platform as part of the deal.

  • According to the terms of the deal, Momentive stockholders will get 0.225 ZEN shares for every Momentive share.
  • By applying the volume weighted average price of ZEN common stock over a 15-day period up to and including October 26, 2021, this ratio represents an implied value of approximately $28 per outstanding share of Momentive stock.
  • As a result of the combination, ZEN expects to be growth-accretive in its first full operating year and to surpass its previous revenue target of $3.5 billion in 2024, one year early.
  • With their respective large customer bases and complementary capabilities, the companies should have significant opportunities for joint product adoption and traction for Momentive.

Where will ZEN go from here?

As part of the acquisition, Zendesk (ZEN) will reinvest savings from scale efficiencies into opportunities for growth. Momentive CEO Zander Lurie will remain in his role as chairman and CEO following the close of the transaction.

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