Use your overvalued currency to go shopping

OKTA acquires Auth0 for $6.5 billion.

but it doesn’t matter if the Seattle based, cloud based identity management and secure authentication software/platform only does $150 million of revenue;

it is a little bewildering that Auth0 raised $120 million in a Series F round giving it a valuation of $1.92 billion (according to themselves), in July 2020 (only 8 months ago);

but it is interesting that OKTA is buying them in an all-stock deal….

With a market cap of $33 billion, OKTA (whom will do $1 billion revenue this year and still lose money) is using its expensive currency (being its equity) to acquire Auth0 and not cash, which is the undervalued, cheap currency.

The shareholders of the target companies are taking the risk on the future value of the expensive stock currency.

This is the investment banking M&A trend for the next 18 months.

March 4, 2021

by Rob Zdravevski

rob@karriasset.com.au

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