Okta CEO defends a $ 6.5 billion deal for rival Auth0 after shares fell

Todd McKinnon, Okta CEO, on Friday defended his company’s move to acquire Auth0, citing the competitor as a complementary asset to its identity and access management business.

Okta stock is down 10% since it announced the $ 6.5 billion all-stock deal after it closed on Wednesday. The sales figure is more than a fifth of Okta’s market capitalization and a $ 1.92 billion valuation premium that Auth0 received after a round of funding last summer.

“This is a company that is about to go public and, as you know, public markets value public companies in some ways,” McKinnon told CNBC’s Jim Cramer.

He appeared on “Mad Money” alongside Eugenio Pace, the managing director of Auth0.

“If you look at how we rate it, the growth is positive for us,” added McKinnon. “We have actually paid many times more income that is slightly below ours but is in the same stadium.”

Auth0 is an identity management platform for app developers based in Bellevue, Washington. It competes with Okta, a $ 28 billion cybersecurity company based in San Francisco. Okta offers security tools to authenticate users, e. B. Password permissions and access to online networks.

Auth0 will act as an independent branch within Okta when the transaction closes in late July.

When asked about the need to acquire a different identity provider if Okta already has its own offerings, McKinnon said the merger would provide his company with a better way to tackle customer identity and access management.

He stated that the $ 30 billion personal identity market accounts for 75% of Okta’s sales, while the $ 25 billion customer identity market accounts for 25% of sales. Okta is more focused on out-of-the-box, pre-built solutions, while Auth0 is more focused on purpose-built app developers, he added.

Auth0 is “a product that is much more flexible, extensible, and does exactly what the developer has to do, and that’s why the two solutions together are so compelling,” said McKinnon. “They give customers great choice, flexibility, and value for money, and they really solidify that $ 25 billion [total addressable market]. “

Okta’s shares fell 4.54% to $ 215.96 on Friday. The company reported fourth quarter revenue of $ 234.7 million on Wednesday, up 40% year over year. A net loss of $ 75.8 million was reported, compared to a loss of $ 50.5 million in the year-ago quarter.