RingCentral and 8x8's stocks soared after an investor disclosed significant stakes in both companies, with filings seeking business combination discussions with management.
Sylebra Capital, an activist investment firm based in Hong Kong and controlled by investor Daniel Patrick Gibson, disclosed an 8.7 percent position in RingCentral (worth around $250 million) and, in a separate filing, a 12.4 percent stake in 8x8 ($60 million).
Both filings were posted last Friday, and following their postings, RingCentral and 8x8's stocks grew by roughly 18 percent and 13 percent, respectively.
Both filings included language signposting Sylebra's possible intention to discuss merger-and-acquisition plans with RingCentral and 8x8.
Under Item 4, "Purpose of Transaction", of the filings for RingCentral and 8x8, it read:
The Reporting Persons intend to engage in discussions with the Issuer and consider exploring and/or developing plans (whether preliminary or final) that may relate to, among other things, the operations, governance, management, business, assets, financial condition, corporate structure and strategic merger and acquisition plans of the Issuer. Such discussions may include proposals regarding possible strategic transactions including possible business combinations."
Sylebra had previously disclosed a stake in 8x8 under form 13G, delineating a passive position on business operations. However, both of Friday's filings were 13D forms requiring investors to be active participants.
Could a RingCentral and 8x8 Deal Happen?
At the time of writing, the deal murmurs and share price hikes are based on inferences formed by the connection between Sylebra's two filings. There was no explicit mention of 8x8 in Sylebra's RingCentral filing and vice versa, and it is as yet unconfirmed whether a merger or acquisition is Sylebra and Gibson's intent.
There was a murmur, however, about a RingCentral acquisition of 8x8 last year after an unnamed Investing.com source told the financial news website that RingCentral had approached 8×8 about a potential takeover, prompting many analysts to consider the possibility.
Investing.com's source said that RingCentral was working with an investment bank to analyse the implications of a potential purchase. The source claimed that 8x8 was reluctant to sell because of its weak negotiation position at the time, given its relatively low-value share price — 8x8's price was trading at around $3.92 near the end of 2022, a drop from the price of $21.3 by the end of 2021. According to the source, 8x8 might have believed this undervalued the company in any deal.
RingCentral's share price also declined through 2022 from its historic high of $443.3 in February 2021 during the pandemic to roughly $35 by the time the rumour of the potential 8x8 acquisition broke in November. RingCentral, additionally, revealed it had laid off 10 percent of its staff as part of its Q3 2022 earnings call.
However, both 8x8 and RingCentral have enjoyed solid starts to 2023. 8×8 ended the financial year 2023 with a strong fourth quarter, with revenue growing two percent to $184.5 million.
