Zendesk Drops 12% After Halting Sale Efforts

June 09, 2022

Zendesk, Inc. (ZEN) dropped 12% after management announced the completion of a strategic review on Thursday, stating it would stop pursuing acquisition opportunities and remain independent. 

Of the 107 ETFs holding ZEN, many are focused on cloud computing and virtual work solution investments. The ProShares Big Data Refiners ETF (DAT) has the most exposure overall, with a 7.38% weighting to the stock.  

 

 

U.S.-listed ETFs hold 7.3 million shares of Zendesk, with Vanguard funds holding the top four spots. The Vanguard Total-Stock Market ETF (VTI) sits in the top position with 787,160 shares. 

 

 

Of the 107 ETFs that hold ZEN, more than 35% are plain vanilla, cap-weighted funds, though the stock has a presence in growth, ESG, fundamentally weighted and actively managed ETFs.  

 

 

Customer Service Software Solutions 

Zendesk provides customer service software solutions for more than 100,000 brands across the world, according to its LinkedIn profile. Its goal is to help companies better communicate with customers while lowering costs by keeping customer data in one location. 

Like many technology stocks, ZEN's share price has been hit hard in 2022. Thursday's 12% drop put it close to its 52-week low of $68.10, far off its 52-week high of $153.43. 

However, until today, ZEN has outperformed the S&P 500 for the year, largely because investors believed the company would be acquired. 

In February, Zendesk reportedly turned down two offers for acquisition, one of which was rumored to be worth $17 billion by private equity firms.  

At the time, Zendesk was reportedly close to acquiring Momentive/Survey Monkey for $4.1 billion, which was factored into the $17 billion valuation. Zendesk said acquiring Momentive would increase projected revenue by $1.2 billion, or roughly 35%, by 2025. 

Once the deal was rejected by its own investors, though, many Zendesk investors jumped ship. The stock's share price has been on a steady decline since the end of April. 

Many who've held on believed another acquisition opportunity might come through, until Zendesk confirmed the completion of its independent strategic review on Thursday. 

Aimed at identifying strategic alternatives to increase shareholder value, Zendesk concluded that, "no actionable proposals [have been] submitted, with the final bidders citing adverse market conditions and financing difficulties at the end of the process." 

Zendesk went on to say it will stop trying to sell the company and continue to operate independently. 

Despite a turbulent 2022, the company recently reported revenue growth for Q1 of 22% and is forecasting roughly 27% revenue growth for 2022. Thursday's drop in price could be seen as a value opportunity for some investors. 

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