(Bloomberg) -- Investors should reject Zoom Video Communications Inc.'s planned purchase of Five9 Inc., according to influential advisory firm Institutional Shareholder Services Inc.
Zoom's offer to acquire Five9, valued at $14.7 billion when it was announced, exposes the software maker's shareholders to “a more volatile stock whose growth prospects have become less compelling as society inches towards a post-pandemic environment,” ISS said in a note published Friday.
The all-stock deal, announced in July, took advantage of Zoom's soaring stock price during the pandemic. Zoom would use the deal to expand into an adjacent market that could bolster revenue as lockdowns end. But the company's recent earnings report gave a sales forecast that fell short of some analysts' estimates, raising concerns it will have difficulty maintaining growth as workers turn away from remote meetings. Zoom's shares are down 21% since it announced the offer for Five9.
At the same time, the prospects for Five9, which makes cloud-based software that uses artificial intelligence to help companies answer questions from customers and interact with them, have improved, according to ISS.
ISS said the “limited scope” of the board's sale process has left an open question as to whether other potential bidders would emerge if the deal with Zoom falls through.
Five9 shares were up 2.9% in premarket trading in New York while Zoom was little changed.
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