Pinterest, Zoom Video Debuts Set Pace for Unicorns' IPO Derby
The strong showing by Pinterest and Zoom signals continuing investor thirst for new stocks amid a surge of unicorns.
(Bloomberg) -- Pinterest Inc. and Zoom Video Communications Inc. hit the public markets Thursday in soaring debuts, setting the pace for other so-called unicorns racing toward initial public offerings.
Zoom’s dizzying ascent -- its shares rose as much as 83 percent before closing up 72 percent -- left founder and Chief Executive Officer Eric Yuan lamenting the high price and the pressure it puts on the company. That concern arose despite Yuan becoming a billionaire three times over as the video-conferencing company soared to a value of $15.9 billion after its $751 million IPO. Just two years ago, Zoom was valued at only $1 billion in a private funding round.
“The price is too high,’’ Eric Yuan said in an interview with Bloomberg TV. “Today, wow, there’s a big pop. It is out of our control.’’
Pinterest, the digital-scrapbooking site whose advertisers seek to reach purchase-minded consumers, raised $1.4 billion in its IPO, second only to Lyft Inc. for U.S. IPOs this year. Along with Texas oil explorer Brigham Minerals Inc.’s $261 million listing and offerings by two smaller companies, Wednesday was the biggest day of the year for IPOs, with more than $2.7 billion in new shares sold.
Like Zoom, Pinterest priced its shares above its marketed range and began trading Thursday, closing its first day up 28 percent. Brigham Minerals trailed those two with a merely solid 11 percent gain for the day.
The strong showing by Pinterest and Zoom signals continuing investor thirst for new stocks amid a surge of unicorns -- startups valued at $1 billion or more -- going public. Other high-profile companies with plans to go public or considering it include Uber Technologies Inc., Slack Technologies Inc., Postmates Inc., Palantir Technologies Inc. and Airbnb Inc.
Uber Ahead
Ride-hailing global behemoth Uber is preparing what will likely be the year’s biggest IPO in the U.S. It will seek to raise about $10 billion in May in a listing valuing it at about $100 billion, people familiar with its plans have said.
“Today’s opening pop in the shares of Zoom and Pinterest suggests that investors are not looking at ‘risky’ unicorns as a group, but instead are valuing each company on their merits,” Alejandro Ortiz, principal analyst at SharesPost Inc., said in a emailed statement.
Lyft Fears
Fears that Lyft’s sagging stock -- it’s fallen 19 percent from its $72 IPO price -- would bode poorly for other unicorns appear to have been overblown, Ortiz said.
At its highest price on Thursday, Zoom briefly overtook the market valuation of Lyft, which ended Thursday at $16.7 billion. The jump Zoom’s shares put its valuation above that of Pinterest, with $12.9 billion, and Tradeweb Markets Inc., which raised $1.1 billion in the third-biggest U.S. listing this year and is now valued at about $8.7 billion.
Whether Zoom and Pinterest can hold on to their debut gains will be determined beginning Monday, when the market reopens after the Good Friday holiday and the weekend.
Unlike most of tech unicorns that have gone public or plan to this year, Zoom 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.
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.
‘Stay Humble’
Yuan, Zoom’s CEO, said that he thinks that the San Jose, California-based company 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 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.
Pinterest, whose IPO was led by Goldman Sachs, JPMorgan and Allen & Co., trades on the New York Stock Exchange under the symbol PINS.
The San Francisco-based company operates in a crowded digital marketing space, where Google and Facebook Inc. get the lion’s share of ad dollars. Pinterest has taken a slow and steady approach to growth and making money from the service, compared with the faster expansion rates of Facebook, Twitter Inc., and Snap Inc. when they went public.
Like many of its unicorn peers going public, Pinterest faces the challenge of becoming profitable while still growing.
Growth, Losses
Pinterest said in its IPO filing that it now reaches more than 250 million monthly active users globally. The company had about $756 million in revenue from online advertisements in 2018, a 60 percent growth rate that accelerated from the previous year. Its net loss shrunk to $63 million in 2018 from $130 million in 2017.
Pinterest has a key advantage in competing for advertising dollars, Chief Executive Officer Ben Silbermann said Thursday in an interview. Unlike other sites, Pinterest users typically are looking to eventually buy what they are searching for, which lines up with what advertisers want, he said.
Most of its user growth, though, is coming from international markets, where the average revenue per user is much lower than in the U.S. In 2018, more than 80 percent of new users were from outside the U.S., however, they generated about 25 cents per person compared with $9.04 for those based in the U.S.
“We’re going to continue to invest for the long term,” he said. “We’ve shown really good margin improvement over the last few years. My eye is always on what’s going to make Pinterest great three years, five years, 10 years from now. That’s going to be how we continue to run the business.”
--With assistance from Olivia Zaleski.
To contact the reporters on this story: Selina Wang in San Francisco at swang533@bloomberg.net;Matthew Monks in New York at mmonks1@bloomberg.net;Emily Chang in San Francisco at echang68@bloomberg.net
To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, ;Jillian Ward at jward56@bloomberg.net, Michael Hytha, Alistair Barr
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