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id: 86, Created by Andrew Earley, Scout
Zendesk (ZEN) M&A Case
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- On August 8, 2022, Zendesk (ZEN), its Leaders, and Advisors solicited the Company’s shareholders’ approval of the acquisition by an investor group led by Hellman & Friedman LLC in the transaction that valued $ZEN at $77.50 per share.
- Investors deem the transaction as unfair and suspect $ZEN, Its Leaders & Advisors of misleading and breach of fiduciary duties to shareholders.
The management of Zendesk systematically made decisions that led to a decrease in its capitalization and eventually decided to fixate the result of their work through the sale at a lower price.
It all started with a vague M&A attempt, along with which the company refused to be bought at $130 per share. After pressure from investors, the Company was unable to find a buyer and collapsed shares with a message that the search for a buyer was canceled. And now, at the very bottom, we find out information about the sale at $77,5, although in June the price was more than $90.
Back on October 26, 2021, the company announced a potential purchase of Momentive Global Inc., causing its own stock to drop about 30%. The potential deal was as opaque as possible and the market saw no synergy. Which eventually led to the overwhelming advantage of the opponents of the deal at the shareholder's meeting held on February 25, 2022 (90,3% against). At the same time, the board of directors refused to sell the Company. Zendesk said that it rejected an "unsolicited" bid from a consortium of private equity firms to acquire Zendesk in an all-cash transaction valued between $127 and $132 per share. Zendesk said the bid "significantly undervalues" the Company. This information was made public at the time of the publication of the Q4 report on February 10, 2022, which means that the deal was rejected due to an attempt to complete the deal with Momentive.
On May 31, 2022, a well-known “bear” Hedgeye named Zendesk shared as Best New Short Idea. This information has started to put pressure on the company's quotes. The analyst Ami Joseph emphasized that it was a mistake to refuse the sale at the beginning of the year and the Zendesk is unlikely to be able to receive a similar offer.
On June 09, 2022, the Company announced that its Board of Directors has conducted and completed a comprehensive review of strategic alternatives aimed at enhancing stockholder value. After a thorough process conducted with the assistance of its financial advisors at Qatalyst Partners and Goldman Sachs & Co and its legal advisors at Wachtell, Lipton, Rosen & Katz, which included soliciting interest from a wide range of potential strategic partners and financial sponsors regarding a potential sale of the Company, the Board has unanimously determined that continuing to execute on the Company’s strategic plan as an independent, public company is in the best interest of the Company and its stockholders at this time.
This once again reduced the capitalization of the company.
Just 2 weeks after that, the management decides to sell the company, during a correction in the market, during the action of a "self-created" negative news background, and at a deliberately low price.
Taking into account all the facts, the actions of the Company and the unequivocal reaction of the market, there are reasons to suspect that Zendesk Leaders did not act in the best interest of the Company's stakeholders.
Breach of Fiduciary duty
Shock Event Date
24 June 2022
17 March 2023
Lead Plaintiff Deadline
18 May 2023
Hon. Jacqueline Scott Corley