A Sad Exit: LivePerson Investors Face Near-Total Loss

LivePerson, once considered a prominent Israeli-American success story, is nearing the end of its journey as a public company. Its acquisition by SoundHound AI recently cleared a major hurdle: the company reported that the final missing regulatory approval from the competent authority in Bulgaria has been received.

With this approval, which follows those already granted in Italy, Canada, Germany, and the UK, all regulatory obstacles to closing the deal have been removed. The only remaining step is the approval of LivePerson's shareholders, but with the regulatory issues resolved, completion of the move appears to be a matter of time.

From an investor's perspective, this is a particularly sad "exit." LivePerson, which developed chat systems and customer service solutions for websites and call centers, reached a valuation of approximately $5 billion at its peak during the COVID-19 pandemic. Since then, it has plummeted by nearly 100% from its peak, falling to a valuation of only about $19 million in the US and roughly 55 million shekels on the Tel Aviv Stock Exchange today.

SoundHound will pay about $43 million for LivePerson shares, representing a premium of about 120% over the current price. However, this premium offers little comfort to those who held the stock for many years: it is a mere fraction of the company's peak value and represents an almost total loss for those who invested during its prime.

The story of LivePerson serves as an example of how a successful company can collapse rapidly. It was founded in 1995 in the US by entrepreneur Rob LoCascio, who managed the firm for nearly three decades until he was forced to step down in August 2023 following pressure from activist investors.

At the height of its success, LivePerson was a pioneer in digital business-to-customer communication. The company developed tools that allowed businesses to conduct live chat conversations with users, eventually transitioning to a Software as a Service (SaaS) model based on cloud technology.

Its core product enabled organizations to communicate with customers not only on their websites but also via messaging apps like WhatsApp and Facebook Messenger, and later through bots and artificial intelligence systems for managing automated conversations. Its client base included banks, airlines, car manufacturers, and major telecommunications companies, with its systems managing about a billion interactions every month.

A few years after its founding, the company acquired an Israeli startup, established a significant development center in Ra'anana, and went public on the Tel Aviv Stock Exchange. However, a continuous decline in sales, investor struggles, and negative cash flow gradually eroded the company, leading to an almost complete collapse of its value.

Beyond the capital losses for investors, a major challenge looms over the deal: the company carries about $400 million in convertible bond debt due for repayment this year. SoundHound, which trades on NASDAQ with a valuation of about $2.68 billion after a 38% drop this year and 48% over the last year, noted that after accounting for a significant discount on the debt, the total value of the deal is estimated at approximately $250 million.

According to the company, the discounted debt will be settled through a combination of cash and equity, ensuring the merged entity maintains a strong, debt-free balance sheet. In other words, a debt restructuring with bondholders is likely, and they are also expected to take a haircut.

The bottom line for investors is clear: this is the closing of a painful chapter, not a chance for recovery. Conversely, for SoundHound, the move opens the door to a broad customer base in the field of AI-driven service, combined with voice and text capabilities, effectively turning the remnants of the company into a strategic asset.