Shares of Salesforce traded lower today, despite the company hosting a multi-hour keynote that included a buffet of Marc Benioff.
That Slack did well since news of the deal broke is not a surprise. Salesforce is paying more for the company than it had been worth, the premium to its prior value constituting its argument that Slack’s investors should approve the deal. This is standard in corporate takeovers.
But what to make of Salesforce’s value declines? Let’s first calculate how much ground the company has lost on the stock market.
Here’s what’s happened to Salesforce’s stock from November 25th, when the deal initially leaked during the day, to today. We’re calculating the daily change between the preceding day’s close and the listed day’s final price:
- November 25: -5.4% (deal leaks midday)
- November 27: +0.33%
- November 30: -0.74%
- December 1: -1.8% (deal is announced after-hours)
- December 2: -8.52%
Salesforce saw its share price fall from around $264 before the deal became known to $220.78 at the end of regular trading today. The loss in value works out to 16.5%. From a different perspective, Salesforce lost around $18.7 billion in value today alone.
Those swings constitute a summary rejection of the deal by investors, I’d say, or of Salesforce’s recently stated guidance, which was inclusive of the deal. Salesforce has lost more value than the transaction is worth, which feels notable.
My gut says that investors are worried that Salesforce is overpaying for Slack, and that potential synergies between the two won’t amount to as much as the two companies’ CEOs imagine. But I wanted to ask my colleague Ron Miller about the situation, to see if he could add anything to the why isn’t Wall Street liking this combo more question. Here is his take:
While Wall Street appears to be taking an initial dislike to the deal — it is a big gaudy number — over time I think they should come to understand it better. Slack will give Salesforce the social piece it has been longing for since the days of Enterprise 2.0. They initially tried to build it themselves with Chatter, but that never quite caught on. Ten years later, they finally have their social component.
Benioff’s instincts about what his company needs are usually on target, and while he may have overpaid for this bauble, the ability to tie his company’s products together under Slack’s communications and work integration umbrella proved too attractive to resist.
Don’t forget in spite of the fact that Microsoft Teams is making headway, mostly by giving it away for free with Office 365 subscriptions, Slack remains the darling of the developer class. And as long as Salesforce finds a way for it to maintain its independence, the marriage could work out. At the very least, it deserves a chance to prove that it can.