Confluent's $11B IBM Buyout Faces Scrutiny for Undervaluing Shares

PHILADELPHIA, PA – January 20, 2026 – The proposed $11 billion acquisition of data-streaming pioneer Confluent, Inc. (NASDAQ: CFLT) by tech behemoth IBM is facing legal scrutiny from an investor rights law firm, raising questions about whether the deal's price tag fairly compensates shareholders.

Kaskela Law LLC, a firm specializing in merger and acquisition litigation, has launched an investigation into the buyout agreement announced on December 8, 2025. The deal stipulates that IBM will acquire all outstanding shares of Confluent for $31.00 per share in an all-cash transaction. Upon completion, Confluent would become a private, wholly-owned subsidiary of IBM, and its stock would be delisted from the NASDAQ exchange.

The investigation centers on the core question of valuation. Kaskela Law argues the buyout price may “materially undervalue the company’s shares and shortchange investors.” The firm’s initial press release highlighted that, at the time of the announcement, at least one stock analyst had maintained a price target of $36.00 per share, a figure more than 16% higher than IBM’s offer. This discrepancy forms the basis of the firm’s inquiry and its call for concerned shareholders to explore their legal options.

The Deal and the Discrepancy

Under the terms of the merger, the $31.00 per share offer represented a significant premium of approximately 35% over Confluent's 30-day volume-weighted average price prior to the announcement. However, the focus of the investigation goes beyond the immediate premium, scrutinizing the company's intrinsic and future value.

While the law firm points to a higher analyst target as evidence of undervaluation, the market's reaction following the deal's announcement has been more aligned with the offer price. In the days after the acquisition was made public, several investment banks, including Wells Fargo, Citizens JMP, and RBC Capital, adjusted their price targets to $31.00, reflecting the new reality of the cash buyout. This suggests that while some analysts previously saw a higher ceiling for the stock as a standalone entity, the certainty of the IBM offer has anchored near-term expectations.

Kaskela Law is encouraging shareholders who believe the price is insufficient to come forward. “Confluent shareholders who think the buyout price is too low are encouraged to contact Kaskela Law LLC… for additional information about this investigation and their legal rights and options,” the firm stated. Such investigations are common in large-scale M&A and often serve as a precursor to class-action lawsuits or campaigns to solicit a higher bid.

Confluent’s Strong Financial Trajectory

The argument for a higher valuation is buttressed by Confluent's robust financial health and strong growth prospects, particularly in its cloud-native offerings. The company, which commercialized the open-source Apache Kafka technology, has established itself as a leader in the critical field of “data in motion.”

In its most recent financial report for the third quarter of 2025, Confluent demonstrated significant momentum. The company posted subscription revenue of $286.3 million, a 19% increase year-over-year, with its high-growth Confluent Cloud segment jumping 24% to $161 million. This performance helped the company expand its non-GAAP operating margin to 9.7% and deliver a non-GAAP earnings per share of $0.13, beating analyst forecasts.

Customer metrics also paint a picture of a healthy, expanding business. Confluent reported a 10% year-over-year increase in customers with an annual recurring revenue (ARR) of $100,000 or more, reaching a total of 1,487. The company also noted accelerating growth among its largest, million-dollar-plus ARR customers. This indicates deep and expanding adoption within large enterprises, a key indicator of long-term value. Furthermore, the adoption of its Flink technology for stream processing is surging, with Flink ARR growing over 70% sequentially in the third quarter.

This strong performance and a stated revenue run rate of over $1 billion have led the company to achieve non-GAAP profitability, a significant milestone for a high-growth tech firm. It is this combination of rapid growth, expanding margins, and a market-leading position that fuels the argument that the company’s long-term potential is worth more than the $31.00 per share currently on the table.

IBM's Strategic Play for an AI-Powered Future

From IBM's perspective, the acquisition is a calculated strategic move to fortify its position in the burgeoning artificial intelligence and hybrid cloud markets. Confluent's technology, which enables the real-time flow of data across an organization, is seen as a foundational component for building next-generation AI applications.

In the announcement, IBM CEO Arvind Krishna emphasized this strategic fit, stating that the acquisition will enable enterprises to “deploy generative and agentic AI better and faster.” The vision is to integrate Confluent's platform to create a “smart data platform for enterprise IT, purpose-built for AI.” In a world where AI models and agents require constant access to clean, connected, and real-time data to function effectively, Confluent provides the essential plumbing.

IBM aims to leverage the acquisition to help customers overcome the challenge of data being siloed across disparate cloud and on-premise systems. By integrating Confluent, IBM can offer a more cohesive solution for managing data in motion, which is crucial for everything from real-time analytics to powering intelligent customer experiences. This strategic imperative suggests IBM places a high value on Confluent's capabilities, leading observers to question whether it secured a key asset at a bargain price.

The Path Forward: A Shareholder Vote Looms

The transaction has already cleared a significant regulatory hurdle, with the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act expiring on January 12, 2026. With this condition satisfied, the deal's fate now rests primarily in the hands of Confluent’s stockholders.

A special meeting of stockholders has been scheduled for February 12, 2026, where they will cast a binding vote on the proposed merger. The company’s board has unanimously approved the deal and recommended that shareholders vote in favor. The definitive proxy statement, filed with the SEC on January 9, 2026, outlines the board's rationale, the background of the negotiations, and the fairness opinions it received from its financial advisors.

However, shareholders are not without recourse if they disagree with the board's assessment. Under Delaware law, stockholders who do not vote in favor of the merger can exercise their appraisal rights. This legal process allows dissenting shareholders to petition a court to determine the “fair value” of their shares, which could potentially result in a higher payout than the merger consideration. The investigation by Kaskela Law serves to inform shareholders of these rights and to potentially organize a collective challenge as the pivotal vote approaches.