SoundHound AI, Inc. (NASDAQ:SOUN) shares climbed 6.26% on Monday to close at $6.96, narrowly missing the critical $7 threshold embedded in its acquisition agreement with LivePerson, Inc. (NASDAQ:LPSN). The session saw heightened options activity, with call volume reaching 39,921 contracts—approximately 1.8 times the normal level—as traders focused on the weekly July 10 $7 and $8 strike prices, according to TipRanks/TheFly.
The move outpaced broader market gains, with the Invesco QQQ Trust (NASDAQ:QQQ) and iShares Russell 2000 ETF (NYSEARCA:IWM) rising 1.7% and 0.6%, respectively, ahead of the close. Trading resumed following the Nasdaq's closure on July 3 for the Independence Day holiday.
The Floor and Deal Mechanics
The $7 level is pivotal to SoundHound's acquisition of LivePerson. In a July 2 filing, SoundHound disclosed that the stock component of the deal will be determined using a 10-day Nasdaq VWAP ending three trading days before the close. However, the formula includes a floor at $7 and a cap at $12 for SoundHound's shares. Monday's close at $6.96 effectively tests this floor, with the stock finishing just four cents below the minimum issuance price.
The revised agreement sets the Aggregate Consideration Amount at $42.78 million, before adjustments for cash shortfalls and option modifications. At the $7 floor, this equates to approximately 6.11 million SoundHound shares, or about 1.41% of the company's 432.77 million shares outstanding. If shares rise to the $12 cap, the share count drops to around 3.57 million, or 0.82% of the total. The actual number may vary due to cash shortfalls, option exercises, and other adjustments detailed in the filing.
Should SoundHound's stock trade below the floor, no additional shares will be issued under this plan. Conversely, if the price moves between $7 and $12, fewer shares will be issued as the price increases. The stock is currently down 68.6% from its 52-week high of $22.17.
Options Activity and Market Sentiment
Implied volatility surged more than six percentage points to 78.40%, reflecting heightened uncertainty and trader interest. The weekly July 10 $7 and $8 calls were the most active, suggesting traders are positioning for a potential move above the floor in the near term. Volume reached 28.69 million shares, slightly above the 65-day average.
Wall Street remains optimistic, with seven analysts surveyed by Zacks setting an average price target of $14.29, ranging from $9 to $20. TipRanks reports an average target of $12.75 and a Strong Buy consensus, with four Buy ratings in the last three months. These targets imply significant upside from current levels, though loss estimates for 2026 have widened.
Financial Performance and Valuation
SoundHound reported first-quarter revenue of $44.2 million, up 52% year-over-year. However, GAAP gross margin contracted to 31.1% from 36.5%, and adjusted EBITDA was a loss of $26.7 million. The company ended March with $216 million in cash and no debt, maintaining its 2026 revenue guidance of $225 million to $260 million.
Based on Monday's close, the market capitalization stands at $3.01 billion, implying a price-to-sales ratio of 11.6x to 13.4x on 2026 revenue guidance. At the TipRanks average target of $12.75, the P/S multiple would rise to 21.2x-24.5x, while the Zacks average target of $14.29 corresponds to 23.8x-27.5x. For comparison, C3.ai (NYSE:AI) trades at a P/S of 6.26, and BigBear.ai Holdings (NYSE:BBAI) at 10.95, according to Zacks.
Outlook and Key Dates
SoundHound expects to close the LivePerson acquisition in the second half of 2026, subject to regulatory approvals and other conditions. The combined entity is projected to generate at least $350 million to $400 million in revenue in 2027, with at least $100 million from LivePerson's customers. CEO Keyvan Mohajer highlighted the 52% revenue growth in the first quarter, while CFO James Hom emphasized the company's strong balance sheet.
Zacks rates the stock a Rank #4 (Sell), noting that the 2026 loss-per-share estimate has widened to 18 cents from 13 cents over the past 60 days. Earnings are due August 6, according to TipRanks/TheFly. In the interim, the weekly July 10 $7 and $8 calls offer a near-term gauge of market sentiment around the merger floor.
