Shares of Okta (NASDAQ:OKTA) stock are getting hit hard on Thursday after the company announced its acquisition of Auth0 following market close on Wednesday.
Normally when you read about a company making an acquisition, that means good things for that firm and its stock. That said, why is OKTA stock taking a beating after this move? Here’s what you need to know.
- Auth0 is a cloud identity startup founded in 2013 that focuses on a number of important areas like security, authentication and extensibility.
- The all-stock transaction between Okta and Auth0 is valued at about $6.5 billion.
- However, that figure “equals about 21% of Okta’s market cap as of Wednesday’s close.”
- Overall, Okta believes that this acquisition will help it grow in the $55 billion identity market.
- According to the release, “Auth0 will operate as an independent business unit inside of Okta, and both platforms will be supported, invested in, and integrated over time — becoming more compelling together.”
- The deal is expected to close in the second quarter of fiscal year 2022.
- Additionally, Okta also reported Q4 and FY2021 financial results on Wednesday.
- This had the firm’s quarterly revenue checking in at $234.7 million for the period, a 40% increase year-over-year.
- Okta also reported non-GAAP diluted earnings per share (EPS) of 6 cents for the period, which was 5 cents better YOY.
- Both the revenue and EPS numbers for Okta came in above Wall Street’s estimates.
Todd McKinnon, CEO and co-founder of Okta, said this regarding the OKTA stock acquisition of Auth0.
“Combining Auth0’s developer-centric identity solution with the Okta Identity Cloud will drive tremendous value for both current and future customers … Okta’s and Auth0’s shared vision for the identity market, rooted in customer success, will accelerate our innovation, opening up new ways for our customers to leverage identity to meet their business needs.”
OKTA stock was down 4.4% as of Thursday morning.
On the date of publication, Nick Clarkson did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nick Clarkson is a web editor at InvestorPlace.
