Zendesk (ZEN) is considering a potential sale, according to a Bloomberg report. ZEN stock rose more than 6.1% to $129.12 on April 19. San Francisco-based Zendesk provides software for customer service and sales tasks.
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The company has hired Qatalyst Partners to help with the potential sale. It has reached out to software companies and private equity firms to see if they could be interested in a deal, according to the report.
Zendesk has been under pressure from activist investor Jana Partners for some time. The investor, whose stake in the company is estimated at less than 3%, has been pushing Zendesk for board changes. It has even appointed its own representatives to seek seats on Zendesk’s board. Without the board changes it seeks, Jana thinks Zendesk should be sold, according to the report.
Zendesk Rejects Takeover Offer & Fails to Close Acquisition Deal
In February, Zendesk said it received an unsolicited buyout proposal from a group of private equity firms. The group wanted to buy the company for between $127 and $132 per share and offered to pay for it with cash. Zendesk’s board rejected the offer.
Shortly after declining the buyout offer, Zendesk suffered a setback as its shareholders refused to back its proposal to acquire Momentive Global Inc. (MNTV), the parent of survey platform SurveyMonkey.
Wall Street’s Take
The Street is cautiously optimistic about Zendesk stock with a Moderate Buy consensus rating. That’s based on three Buys versus six Holds. The average Zendesk price target of $142.71 implies 10.4% upside potential to current levels. Shares have increased 25% year-to-date.
Hedge Funds
TipRanks’ Hedge Fund Trading Activity tool shows that confidence in ZEN is currently Very Positive, as 12 hedge funds increased their cumulative holdings of the stock by 3.4 million shares in the last quarter.
Key Takeaway for Investor
If it is true that Zendesk is considering a sale, then it would mark a major shift in management’s thinking about the company’s independence. However, investors could be disappointed if the company accepts a buyout price below the unsolicited offer it rejected.
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