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DocuSign’s (NASDAQ:DOCU) M&A premium is likely now baked into the stock, presenting risk if no deal happens, according to a Wells Fargo analyst.
The note comes after Bloomberg reported on Thursday that banks are in talks to provide financing for a $13 billion purchase of the electronic-signature firm. JPMorgan Chase and Bank of America are in talks for financing. DocuSign fell 1.5% on Friday after dropping 3.3% in the wake of the deal price news.
The $13 billion figure implies a price of ~$60 per share if you include restriction stock units and options, Wells Fargo analyst Michael Turrin wrote in a note on Thursday.
“We believe the M&A premium is now baked in, presenting risk if a deal breaks or becomes less competitive,” Turrin, who has an underweight rating and a $55 price target on DocuSign, wrote in the note.
Private equity firms Bain Capital and Hellman & Friedman are battling to purchase DocuSign, though talks are ongoing and could change, according to media reports.
“We are surprised by the increased scale ($13Bn) of the deal & an ongoing competitive bidding process, given our view that DOCU faces a tough fundamental backdrop (inc. comp headwinds, pricing pressure), leaving mgmt with limited options for organic improvement (+ thus more limited negotiating power),” Turrin added.
Earlier this month, a Bank of America analyst said DocuSign (DOCU) could see as much as $95 a share in a sale, though the price is likely to be lower. BofA analyst Brad Sills, who has a neutral rating on DOCU, raised his price target to $68 from $60 in the note earlier this month.
