Salesforce to acquire Slack, Trump still unhappy with Section 230, and other notable stories from this week in publicly-traded social media companies
Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
CUT SOME SLACK: Salesforce (CRM) and Slack Technologies (WORK) have entered into a definitive agreement under which Salesforce will acquire Slack. Under the terms of the agreement, Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7B based on the closing price of Salesforce's common stock on November 30.
Right after the deal was announced Slack reported a Q3 earnings beat. "We had a phenomenal quarter, headlined by continued acceleration in new paid customer growth, with 12,000 net paid customer additions, up 140% from the same quarter last year," said Stewart Butterfield, CEO and co-founder at Slack. "The accelerating growth is partly driven by increased awareness and demand due to the work from home environment, but we believe the larger portion comes from continued product momentum which shows up in the new user experience and, especially, from Slack Connect driving viral growth. Finally, we're thrilled by the continued momentum in the enterprise segment where we're seeing market leaders overwhelmingly choosing Slack for its unmatched security, scalability, flexibility, and user experience."
Analysts responded to the deal with lowered price targets and downgrades.Citi analyst Walter Pritchard downgraded Salesforce to Neutral from Buy with a price target of $250, down from $300. The analyst is not a fan of the Slack Technologies acquisition, saying the multiple paid "makes it challenging to see a positive return." There is little near-term upside to Salesforce shares as questions around organic growth will likely surface following the deal, Pritchard tells investors in a research note.
Similarly, Piper Sandler analyst Brent Bracelin downgraded Slack Technologies to Neutral from Overweight with a price target of $45, up from $36
. Based on a Salesforce price range of $230 to $241.30, the blended deal price range per Slack share is $44.64 to $45.52, Bracelin told investors in a research note.
Additionally, Slack was downgraded at Stephens, MKM Partners and Cowen.
TRUMP THREATENS TO VETO DEFENSE ACT: Last night President Trump tweeted, "Section 230, which is a liability shielding gift from the U.S. to 'Big Tech' (the only companies in America that have it - corporate welfare!), is a serious threat to our National Security & Election Integrity. Our Country can never be safe & secure if we allow it to stand... Therefore, if the very dangerous & unfair Section 230 is not completely terminated as part of the National Defense Authorization Act (NDAA), I will be forced to unequivocally VETO the Bill when sent to the very beautiful Resolute desk."
ALLEGEDLY TOXIC WORK ENVIRONMENT: Pinterest stakeholders are suing the company's top executives, including CEO Ben Silbermann, accusing management of enabling a culture of discrimination, The Verge's Zoe Schiffer reported. The complaint alleges that Silbermann "repeatedly placed himself before the company, surrounding himself with yes-men and marginalizing women who dared to challenge Pinterest's White, male leadership clique," Schiffer says, noting that the company allegedly ignored or silenced staff who tried to speak out. The plaintiff in the litigation is the Employees' Retirement System of Rhode Island, which oversees $8.5B in public assets, including retirement funds for thousands of Rhode Island teachers, firefighters, and nurses The suit claimed Pinterest executives and board members breached their fiduciary duty by failing to respond to allegations of workplace discrimination. “Even when presented with widespread claims of race and gender discrimination at Pinterest, the [executives and board members] did nothing to address this misconduct,” the suit read.
News of the suit came after Argus analyst John Staszak upgraded Pinterest to Buy from Hold with an $80 price target. The analyst told investors in a research note that the company posted "solid" Q3 results and looks to be on track for continued strong growth in both monthly average users and average revenue per user. Staszak adds that Pinterest is also benefiting from "streamlined" advertising systems through the Pinterest Partners Program for smaller merchants and product improvements like Shop tab.
FACEBOOK OVERSIGHT BOARD TO DELIBERATE: Facebook's Oversight Board announced the first cases it will be deliberating and the opening of the public comment process
More than 20,000 cases were referred to the Oversight Board following the opening of user appeals in October. The board is prioritizing cases that have the potential to affect lots of users around the world, are of critical importance to public discourse or raise important questions about Facebook's policies. Six cases have now been selected by the Board, including five user appeals and one case referred by Facebook. One case involved a user posting a screenshot of two tweets by former Malaysian Prime Minister, Dr Mahathir Mohamad, in which the former Prime Minister stated that "Muslims have a right to be angry and kill millions of French people for the massacres of the past" and "but by and large the Muslims have not applied the "eye for an eye" law. Muslims don't. The French shouldn't. Instead the French should teach their people to respect other people's feelings." The user did not add a caption alongside the screenshots. In another case, a user posted two well-known photos of a deceased child lying fully clothed on a beach at the water's edge. The accompanying text (in Burmese) asks why there is no retaliation against China for its treatment of Uyghur Muslims, in contrast to the recent killings in France relating to cartoons. The post also refers to the Syrian refugee crisis. Another involved a user posting alleged historical photos showing churches in Baku, Azerbaijan, with accompanying text stating that Baku was built by Armenians and asking where the churches have gone. The fourth listed case described a user in Brazil posting a picture to Instagram with a title in Portuguese indicating that it was to raise awareness of signs of breast cancer. Eight photographs within the picture showed breast cancer symptoms with corresponding explanations of the symptoms underneath. Five of the photographs included visible and uncovered female nipples. The remaining three photographs included female breasts, with the nipples either out of shot, or covered by a hand. In another case, a user in the U.S. was prompted by Facebook's "On This Day" function to reshare a "Memory" in the form of a post the user made two years ago. The user reshared the content. The post (in English) is an alleged quote from Joseph Goebbels, the Reich Minister of Propaganda in Nazi Germany, on the need to appeal to emotions and instincts, instead of intellect and on the unimportance of truth. The final case the Board listed involved a user posting a video and accompanying text within a Facebook group related to COVID-19. In the video and text, there is a description of an alleged scandal about the Agence Nationale de Securite du Medicament (the French agency responsible for regulating health products) purportedly refusing authorization for use of hydroxychloroquine and azithromycin against COVID-19, but authorizing promotional mail for remdesivir.
Members will be focused over the coming weeks on deliberating and deciding the first cases, which will be published online.
ZOOM EARNINGS: Despite Zoom (ZM) reporting a Q3 earnings beat, providing Q4 guidance above consensus, and raising its FY21 outlook, shares of the stock fell 5% on Monday. Also on Monday, Amazon Web Services (AMZN) announced that Zoom Video had selected AWS as its preferred cloud provider.
While Zoom Video's Q3 results and Q4 guidance were strong against Street expectations, the shares are pointed lower given higher investor expectations, the upside being primarily driven from commercial, and an elevated valuation, Piper Sandler analyst James Fish told investors. The analyst reiterated a Neutral rating on the shares with a $501 price target but adds that Zoom continues to re-define the communication stack and remains poised for further share gains.
William Blair analyst Bhavan Suri estimates that buy-side expectations for revenue were in the ballpark of $800M compared to the company's performance of roughly $777M. The analyst continues to be positive on Zoom but sees a "number of moving pieces that could create volatility" in the shares near term.
Keywords: acquisition, downgrade, little near-term upside, Trump, veto, discrimination, monthly average users, Oversight Board, COVID-19, earnings beat