Zoom plans $1.5 billion share sale at 10 occasions its IPO value

Zoom founder Eric Yuan speaks prior to the Nasdaq opening ceremony on April 18, 2019 in New York City.

I have Betancur | Getty Images

Zoom announced Tuesday that it plans to raise $ 1.5 billion on a secondary stock sale and valued its stock 10 times higher than in 2019.

The video chat company, which benefited significantly from the remote working boom during the Covid-19 pandemic, expects its share price to reach $ 337.71 based on the close of trading on Monday. Zoom went public less than two years ago, selling shares for $ 36 each. Around 4.4 million new shares are expected to be sold.

Zoom takes advantage of a surge in investor interest after the stock’s value quintupled last year as the company’s flagship became a household name. Zoom is already profitable, but selling stocks will fill its balance sheet. The company had $ 730.5 million in cash in October compared to $ 283.1 million in January.

Zoom’s share rally in 2020

With a market capitalization of nearly $ 100 billion, Zoom has the equity to make significant acquisitions.

The second sale will provide the capital to combine cash and make deals potentially more attractive to destinations. Zoom plans to use the money for operating costs and investments and “may also use a portion of the net proceeds for acquisitions or strategic investments in complementary companies, products, services or technologies”.

While Zoom’s valuation has increased tenfold since going public, the company is well below its high. Since peaking at $ 568.34 in mid-October, Zoom shares have fallen more than 41%, which has been the biggest impact on reports that Covid-19 vaccines are highly potent and fast to market.

Zoom’s revenue growth has surpassed 350% in each of the last two quarters, and the company announced in its latest earnings report in November that fiscal fourth quarter growth would approach 330%. Growth is likely to slow dramatically by mid-year as the company grapples with much tougher comparisons and the likelihood of employees returning to the office.

Zoom stock rose 1.6% on Tuesday afternoon to $ 343.14.

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