Zoom Video CEO Wishes Shares Didn't Soar Quite So High in Debut
(Bloomberg) -- Zoom Video Communications Inc. skyrocketed in its trading debut, soaring to more than 16 times its last private valuation and making a billionaire of its chief executive officer several times over.
That CEO, however, says the huge leap in the stock is piling the pressure on the company, which was valued at about $1 billion in a private funding round just two years ago.
“The price is too high,’’ Eric Yuan said in an interview with Bloomberg TV on Thursday. “Today, wow, there’s a big pop. It is out of our control. We can just go back to work.’’
Shares of the video-conferencing service rose as much as 83 percent above its initial public offering price, and closed up 72 percent at $62 at in New York, valuing the company at $15.9 billion. San Jose-based Zoom raised $751 million in its IPO Wednesday, in the fourth-biggest U.S. listing this year.
The jump in the shares puts Zoom’s valuation above that of two companies that raised more money in their recent IPOs. Tradeweb Markets Inc., which raised $1.1 billion in the third biggest U.S. listing this year, has climbed about 45 percent since its debut for a total value of about $8.7 billion. Pinterest Inc., which also started trading Thursday, climbed 28 percent to a market valuation of $12.9 billion.
At its highest price on Thursday, Zoom even briefly overtook the market valuation of Lyft Inc., the year’s biggest IPO so far. Shares of the ride-hailing company are down 19 percent since it raised $2.3 billion in March for a valuation of $16.7 billion.
Zoom, unlike most of tech unicorns that have gone public or plan to this year, has made a profit. It reported net income of $7.6 million for the year ended January on revenue of $331 million, compared with a loss of $3.8 million a year earlier on revenue of $151 million.
Yuan, the company’s founder, said that he thinks that, despite the soaring valuation, Zoom can live up to the hype.
“The market opportunity is huge, over $40 billion,’’ Yuan said. “As long as we stay humble, continue working as hard as we can to keep delivering happiness to our customers, I think it will be OK in the long run.’’
Zoom’s financials are “one of the most impressive’’ ever seen by D.A. Davidson in an IPO filing, analyst Rishi Jaluria wrote in a note to clients in March. He said at the time that he wouldn’t be surprised if it reached a valuation of $10 billion to $15 billion on its first day as a public company.
The company has said its mission is to make video communication “frictionless,” as more employees work remotely and use conferencing services to connect with coworkers. International Data Corp. has estimated that the segments of the market in which Zoom operates could be worth as much as $43.1 billion by 2022, according to a regulatory filing.
Its customers include Uber Technologies Inc., which averaged 14 million minutes per month spent in Zoom meetings in 2018, as well as media company Discovery Inc. and software maker VMware Inc.
Still, the business isn’t without risks. Though the standard disclaimer in many IPO documents -- that the company may never be profitable -- is missing, Zoom cited increased competition, service outages and cybersecurity threats as concerns that investors should be aware of, acknowledging that its security measures have been compromised in the past and could be again.
Zoom also noted its large research and development operations in China, where it employed more than 500 people as of January. This, it said, could expose the company to “market scrutiny regarding the integrity of our solution or data security features,” especially against the backdrop of the Trump administration’s continued efforts to close a trade deal with China.
The offering was led by Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc. and Credit Suisse Group AG. The stock is trading on the Nasdaq Global Select Market under the ticker ZM.
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