RingCentral and 8×8‘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 8×8 ($60 million).
Both filings were posted last Friday, and following their postings, RingCentral and 8×8’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 8×8.
Under Item 4, “Purpose of Transaction”, of the filings for RingCentral and 8×8, 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 8×8 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 8×8 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 8×8 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 8×8 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 8×8 was reluctant to sell because of its weak negotiation position at the time, given its relatively low-value share price — 8×8’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, 8×8 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 8×8 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 8×8 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.
RingCentral’s CEO, Vlad Shmunis, called the company’s Q1 2023 earnings results “a solid start to the year” earlier this month, with total revenue growing 14 percent year-over-year to $534 million.
The suggestion that Sylebra could facilitate a strategic transaction has improved RingCentral and 8×8’s share price. RingCentral’s share price closed on Friday at $34.8, and 8×8’s at $4.1.
Piper Sandler analyst James Fish observed in a research note on Friday: “We have long viewed the potential merger of RingCentral and a CCaaS player made sense given the market dynamics in CCaaS vs its core UCaaS business. Combining the two would likely lead to cost synergies, a better-combined suite of products, and higher UCaaS market share.”
Innovative Times for RingCentral and 8×8
Putting aside any potential strategic transactions between RingCentral and 8×8, both businesses have recently launched innovative products and collaborations.
In March, 8×8 revealed it had integrated AI across its products — including OpenAI’s Whisper model — throughout its XCaaS (eXperience Communications as a Service) platform. 8×8’s Intelligent Customer Assistant, Supervisor Workspace and 8×8 Contact Centre were also integrated with AI/ML natural language tools.
8×8 also announced a partnership with Welsh Water earlier this month, leveraging 8×8’s CPaaS service to provide the not-for-profit drinking water supplier with an advanced video communications solution.
This May, RingCentral announced RingCentral for Teams 2.0. Described in RingCentral’s announcement as a “next-gen” UC app for calling, faxing and SMS, the solution integrates RingCentral’s cloud PBX capabilities into Teams through a fully native experience. Among the innovative new features to boost productivity are voicemail transcription, call recording, bi-directional presence sync, and unified contact search. The offering could also be coupled with RingCentral’s CCaaS solution, RingCentral Contact Centre.
Last month, RingCentral and Vodafone upgraded their shared collaboration and calling platform to enhance the experience of mobile users. The two vendors introduced updates to their Vodafone Business Unified Communications (VBUC) platform, powered by Vodafone’s mobile network and RingCentral’s mobile applications, to provide users with a unified experience for making calls, sending messages, and launching HD-quality video meetings.
In March, RingCentral launched a generative AI platform to enable businesses to turn conversation data into powerful insights called RingSense. The first offering in the RingSense portfolio is RingSense for Sales, which assesses interactions between salespeople and viable customers to create insights and performance metrics.
