Okta (NASDAQ:OKTA) whose cloud software allows office workers to access all of their apps through a secure online service, said on Wednesday that it’s spending $6.5 billion to acquire rival Auth0.
Okta’s shares plunged about 13% in extended trading after the announcement. Those shares fell $6.69, or 2.8%, in the early going Thursday to $234.53.
The all-stock deal equals about 21% of Okta’s market cap as of Wednesday’s close. Okta said it expects the transaction to close by the end of July.
With more large businesses counting on cloud-based applications, Okta has seen its revenue surge since its 2017 IPO. The company said in its earnings statement on Wednesday that fourth-quarter revenue jumped 40% to $234.7 million, beating analyst estimates. Its net loss widened to $75.8 million from $50.4 million a year earlier.
Auth0 last raised private capital in July at a $1.92 billion valuation. Salesforce Ventures led the round, more than tripling its money in eight months.
Okta co-founder and CEO Todd McKinnon was previously a vice president at Salesforce (NYSE:CRM), working under Marc Benioff for over five years. McKinnon is now taking a page from Benioff’s playbook, paying up for acquisitions while still focusing on internal growth.
Salesforce has been the biggest software acquirer in the last few years, agreeing in December to buy Slack for $27.7 billion. Prior to that,
Salesforce bought Tableau for $15.3 billion in 2019 and MuleSoft for $6.5 billion a year earlier.
