Zoom Video Communications Inc. Update
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The U.S. Department of Justice has raised national security concerns over the planned acquisition of Five software, the cloud software company of Zoom Video Communications, calling for a second review of the 14 14.7 billion deal agreed upon by the web conferencing provider.
In a letter to the Federal Communications Commission, the department’s national security department said an inter-agency committee to evaluate “foreign participation” in the U.S. telecom sector should examine whether Zoom’s purchase is “at risk to national security or law enforcement interests”.
The FCC, which is the chief telecom regulator in the United States, is examining the deal, but a committee review would add another level of regulatory involvement.
Zoom’s reliance on a large base of developers in China has long raised questions about China’s potential impact on its operations. San Jose, a California-based company, said no data was flowing to its customers in Asian countries through its servers, although it admitted last year that it had mistakenly routed some calls through China.
One of its executives in China has been seen cooperating with Chinese authorities to stop video conferencing in memory of the 1989 Tiananmen Square protests, even though they were held in the United States. In both cases the DoJ has become the focus of the investigation.
“The US DOJ believes that such risks may be raised by foreign participation (including foreign relations and ownership) associated with the application, and needs to be reviewed by the committee on how to evaluate and make appropriate recommendations. [the FCC] This application should be tried, ”the department said in an August letter.
The letter from the DOJ comes as US officials have taken a tougher stance on sectors including mistrust, foreign investment and securities regulations, amid a tough stance on Chinese investment in American companies amid the cold relations between Washington and Beijing.
Zoom said: “The five acquisitions are subject to the approval of some telecom regulators. We have filed with various applicable regulatory bodies, and these approval processes are proceeding as expected. We expect the necessary regulatory approvals to close the transaction in the first half of 2022. ”
San Ramon, California-based Five 9 declined to comment.
Zoom’s deal to buy Five Buy, announced in July, will mark the company’s first major acquisition. All stock transactions valued shares of Five9 at 200 200.28, with investors setting Zoom Class A to get 0.5533 shares of common stock.
However, concerns about Zoom’s falling stock price and its subsequent lockdown have cast a shadow over the deal. The company’s share price has fallen 23 percent since the announcement of the transaction and is now priced at $ 154 a share, which is significantly lower than the current মূল 170 price.
Institutional Shareholder Services, an influential proxy advisory firm, has recommended that five shareholders vote against the transaction, expressing concern about the company’s growth due to the easing of the epidemic social-distance system.
“All stocks publish contracts [Five9] Shareholders are more volatile stocks whose growth prospects have become less compelling as society moves toward a post-epidemic environment, ”the ISS wrote in a report released last week.
Proxy advisers also warned against political risks related to Zoom’s “significant operation in China.”
The Justice Department’s letter was first reported by the Wall Street Journal.