Zoom Stock Pops Despite Failed Five9 Acquisition

Zoom stock has reeled on the charts since a negative post-earnings reaction

Assistant Editor
Oct 1, 2021 at 3:20 PM
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Zoom Video Communications Inc (NASDAQ: ZM) will no longer be acquiring cloud software company Five9 (FIVN), after the latter's shareholders rejected the deal. Announced back in July in what would have been the second-biggest tech deal of the year, Zoom was slated to acquire Five9 for an all-stock purchase for $14.7 billion. It would have also resulted in the company's first billion-dollar-plus purchase.

At last check, ZM is up 3.4% to trade at $270.27. The security is about a month removed from a massive post-earnings bear gap, which saw Zoom stock lose 16.7% in a single session. Short-term pressure from the 10-day moving average has emerged since. Despite its former pandemic-darling status, ZM has shed nearly 20% year-to-date.

ZM Chart October 1

This negative price action over the last month has attracted plenty of short sellers, and short interest has risen 18% in the two most recent reporting periods. The 12.37 million shares sold short make up 6% of the stock's available float, and would take nearly three days to cover at the average pace of daily trading. 

Meanwhile, the options pits are firmly in the bullish camp. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Zoom stock's 50-day call/put volume ratio of 2.28 stands higher than 88% of readings from the past year. This means long calls have been getting picked up at a much quicker-than-usual clip.

These premiums can be had at a relative bargain. The stock's Schaeffer's Volatility Index (SVI) of 42% sits below all but 11% of annual readings, implying options traders are pricing in relatively low volatility expectations for ZM at the moment. What's more, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 85 (out of 100), suggesting the stock has usually exceeded option traders' volatility expectations in the past year.

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