Salesforce Stock Fell on Slack Acquisition at Premium, Tops Q3 Consensus

Salesforce stock price has been under pressure since the office software developer hinted to buy work messaging app Slack last week. The shares extended the losses this week after Salesforce announced to buy Slack at a high premium price of $27.7 billion in cash and stock deal.

Slack’s market cap was standing around $15 billion last week before the reports of acquisition. The shares of the work messaging app soared almost 60% in the last week amid speculations of the premium price. Slack shareholders will $26.79 in cash and 0.0776 in Salesforce shares per share.

CRM salesforce.com, inc. daily Stock Chart

The company plans to fund the acquisition through cash on hand and debt. Its cash flow generation is still negative while total cash, cash equivalents, and marketable securities stood at $9.49 billion at the end of the latest quarter.

“This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes,”

Salesforce CEO Marc Benioff said.

Salesforce stock fell despite topping estimates

Investors have disliked the acquisition only due to the high premium value. Salesforce stock is down almost 5% in the last week alone. The stronger than expected third-quarter results also failed to optimize investor’s sentiments.

Its third-quarter revenue of $5.42 billion soared more than 20.2% from the past year period, beating the consensus estimate by $160 million.

In addition to the third-quarter beat, Salesforce has also raised its outlook for the full year and first quarter of the next year.

It now expects fiscal 2020 revenue in the range of $21.1 billion compared to the prior forecast of $20.7-20.8 billion. The first-quarter revenue guidance is lifted to $5.715 billion from the consensus estimate for $5.658 billion.

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