Salesforce Stock Drops 8.5% After Slack Selloff

Salesforce stock experienced a decline in value today, even with the company presenting an extensive keynote event featuring Marc Benioff.

The current situation stems from the public announcement of the Salesforce-Slack agreement, which has resulted in a decrease in Salesforce’s share price and a corresponding increase in Slack’s.

It’s not unexpected that Slack’s shares have performed well following the deal’s disclosure. Salesforce is offering a price exceeding Slack’s previous valuation, and this premium is presented as justification for Slack’s investors to approve the acquisition – a common practice in corporate mergers.

However, the decrease in Salesforce’s value requires examination. Let's determine the extent of the company’s losses in the stock market.

Here’s a breakdown of Salesforce’s stock performance from November 25th, the date the deal was initially reported, through today, showing the daily percentage change from the previous day’s closing price:

• November 25: -5.4% (following the midday leak of the deal)
• November 27: +0.33%
• November 30: -0.74%
• December 1: -1.8% (deal announcement after market close)
• December 2: -8.52%

Salesforce’s share price has fallen from approximately $264 prior to the deal’s emergence to $220.78 at the close of trading today. This represents a loss of 16.5% in value. Alternatively, Salesforce lost roughly $18.7 billion in market capitalization today alone.

These fluctuations suggest investor disapproval of the deal, or potentially, of Salesforce’s recent projections which included the acquisition. Salesforce’s value decrease exceeds the transaction’s worth, which is a significant observation.

It appears investors are concerned that Salesforce is paying a premium for Slack, and that the anticipated benefits of combining the two companies may not meet the expectations of their leadership. I consulted with my colleague Ron Miller to gain further insight into why Wall Street isn’t responding favorably to this combination. Here’s his perspective:

Although Wall Street is initially reacting negatively to the deal – it represents a substantial financial commitment – I believe that over time, investors will gain a better understanding of its potential. Slack will provide Salesforce with the social functionality it has sought since the era of Enterprise 2.0. Previous attempts to develop this internally with Chatter were unsuccessful. Now, after a decade, they have secured their social component.

Benioff’s judgment regarding his company’s needs is typically accurate, and despite potentially overpaying for this asset, the opportunity to integrate his company’s products under Slack’s communication and workflow umbrella was too compelling to pass up.

It’s important to remember that despite Microsoft Teams’ growing popularity, largely due to its inclusion with Office 365 subscriptions, Slack remains highly favored within the developer community. As long as Salesforce allows Slack to maintain its autonomy, the merger has the potential to succeed and warrants an opportunity to demonstrate its value.