Could a selfie sink a $4 billion deal?
Angry shareholders are questioning whether an unpopular software merger amounts to a sweetheart deal between two CEO buddies — and they’re pointing to a smiling selfie that the pair posted together on Twitter, On The Money has learned.
Zendesk, a customer support software maker, said in October that it plans buy SurveyMonkey parent company Momentive in a $4 billion all-stock deal. The move baffled some analysts, who argued that it doesn’t make sense for Zendesk — which is bigger than Momentive and growing at a faster rate — to absorb a smaller, slower firm.
Now, as shareholder votes on the acquisition approach in early 2022, some shareholders are crying foul over a personal friendship between the CEOs of Zendesk and Momentive that they say has created a conflict of interest.
Just after the deal was announced in October, Zendesk co-founder and CEO Mikkel Svane posted a little-noticed photo smiling of himself alongside Momentive CEO Zander Lurie on Twitter.
“Big thank you to @zlurie for being an outstanding CEO of Momentive,” wrote Svane. “An inspiring leader. A gentleman. And most of all a good friend over the last 18 months.”
He finished the tweet with a kissing emoji.
The duo also co-hosted a benefit art show in San Francisco alongside other Silicon Valley honchos including Carl Bass, lead director of the Zendesk board, in September — nearly two months before Zendesk’s deal to acquire Momentive was announced.
Indeed, some steaming shareholders have even speculated that the selfie — which shows a picturesque range of hills covered with fir trees in the background — may have been taken at Bass’s Lake Tahoe home.
Activist investor Legion Partners, which owns about 1.4 percent of Momentive, slammed Svane and Lurie’s friendship in a scathing investor letter last week that included a link to the pair’s selfie.
“Lurie and Svane have a very public and close relationship as disclosed on Mr. Svane’s Twitter account – what should have been an obvious and clear conflict was seemingly overlooked by a Board that appears to value its relationship with fellow Silicon Valley insiders over the stockholders they purportedly represent,” Legion Partners wrote.
Investment manager Jana Partners, a big Zendesk investor led by hard-charging shareholder activist Barry Rosenstein, is also raising hackles over the executives’ friendship and calling for the deal to be scrapped.
“Was this motivated by the Zendesk CEO’s personal friendship with the CEO of Momentive?” wrote Jana Partners in a scathing November letter. “Or is the board simply not sufficiently engaged to appropriately safeguard shareholder interests?”
Zendesk and Momentive did not respond to requests for comment but have insisted publicly that they’re going forward with the merger.
On the day the deal was announced, shares of Zendesk fell a whopping 16 percent. At the same time, shares of Momentive — which counts Meta chief operating officer Sheryl Sandberg and tennis superstar Serena Williams among its board members — also plummeted 9 percent. Shares of both companies have still not recovered to pre-announcement levels.
If Legion, Jana and other disgruntled investors get their way, Zendesk and Momentive shareholders will vote down the merger when it comes up for a vote in the first few months of 2022 — or the companies will read the room and avoid bringing the merger up for a vote in the first place.
The standoff comes months after activist shareholders nuked a proposed $15 billion buyout of a call center software firm Five9 by videoconferencing giant Zoom. The companies announced the deal was off in September, following an outcry from Five9 investors who pointed to Zoom’s slowing post-pandemic growth prospects.