Shares of work messaging service Slack Technologies (WORK) - Get Report jumped Monday morning following a report that a deal to acquire the company by Salesforce could be announced as soon as Tuesday after the market close.
The deal is expected to be half cash and half stock, CNBC reported, and will price Slack at a premium to its current price. Slack shares were rising 4.4% to $42.45 on the news, with its previous closing price giving the company a $23.2 billion valuation. Salesforce shares were declining 3.7% to $238.90 on Monday.
Salesforce is scheduled to release its quarterly earnings report on Tuesday afternoon.
Last Wednesday, shares of Slack jumped more than 7% after the company was reportedly approached for an acquisition by Salesforce (CRM) - Get Report.
Any deal would value Slack above its current market capitalization, The Wall Street Journal reported. It would represent Salesforce's largest acquisition to date.
Salesforce previously paid $6.5 billion for MuleSoft in 2018 and $15.3 billion for data visualization company Tableau in 2019.
Slack shares dropped pre-market Monday after analysts at Barclays downgraded the stock to equal-weight from overweight on valuation concerns, although the firm kept its $36 price target on the company.
Analyst Raimo Lenschow said that Barclays now sees limited upside for Slack's shares while also being "mindful of the risk for meaningful downside in case a bid does not materialize," due to the "healthy valuation level" of shares.
Analysts at Wedbush published an industry note Monday morning following the CNBC report, saying "this would be an aggressive move for [Salesforce CEO Marc] Benioff & Co. to further expand [their] cloud enterprise product offering focused on further penetrating its golden installed base with what would be its biggest acquisition ($20 billion+) ever if Slack ultimately gets acquired tomorrow."
Analyst Dan Ives noted that observers have a high degree of confidence in Salesforce's ability to successfully integrate Slack, given its experience with MuleSoft and Tableau, although he called the deal's equity component "a double-edged sword."
Ives added that "this deal would be a major shot across the bow at Microsoft with the company's Teams offering a direct messaging competitor against Slack that has been a clear hurdle to growth and now would be a two horse race between Microsoft and Salesforce."