By Aniruddha Ghosh

(Reuters) – A slump in Zoom Video Communications (NASDAQ 🙂 Inc’s share prices likely restricted its ability to offer a near $15 billion stock all-stock deal for five9 (NASDAQ 🙂 and caused the deal to collapse, Wall Street analysts claimed on Friday.

Zoom was rescinded by Five9 shareholders, who rejected the offer to sell it to Zoom. The move is detrimental to Zoom’s efforts at diversification as its growth slows after booms during the pandemic.

Analysts expected Zoom would raise its offer in order to resolve Five9 shareholder concerns about the price. However, some others stated that a nearly 30% decline in Zoom shares from July due to slowing growth had only hampered the outlook.

The deal would have allowed Five9 shareholders to receive 0.5533 Zoom shares per share. The deal terms also implied an 12.8% premium to Five9’s current market price.

Jefferies analyst Samad Samana stated in a note that “The deal was negative perceived from the beginning due to the small premium, all-stock structuri” and sent it to clients. ZM stock fell 28% in the wake of the announcement. This only made matters worse and may have also made revisions more challenging.

The deal, which would have marked Zoom’s largest ever purchase if closed, was opposed also by proxy advisory firms ISS & Glass Lewis. The companies had suggested that Five9 shareholders oppose the deal, citing concerns about growth and dual-class stock shares.

Piper Sandler analyst said that while the agreement was strategic, it did not make economic sense for shareholders of (Five9) shares.

Analysts Barclays (LON) The fall in Zoom’s share price, as well as possible regulatory scrutiny was the reason for the deal’s failure.

The deal was being reviewed by the U.S. Justice Department over national security issues. Analysts had indicated that the deal could not be scrapped.

Analysts at J.P. Morgan stated that “[Our] conversations, particularly with event-driven investor, suggests that they believe Five9 is important enough for Zoom that they would eventually bump/sweeten their offer for Five9.”

The current situation is made more difficult by the recent decline in stock prices of premium valuation software stocks.

Premarket trading saw Zoom shares rise 1.6% to $265.79, and Five9 stock fell 3% to $155.