Zoom, a video conferencing software company, had its initial public offering on Nasdaq two weeks ago, using “ZM” as it’s ticker symbol. It jumped at 80 percent to $65 and have ended the day at 72 percent at $62.
With Zoom’s stock market value at $15.9 billion, it is one of the fastest growing tech companies going public this year, 2019. However, it has a twist: it is profitable.
After announcing to go public on the 2nd of March, Zoom said that the price of its shares would be in the range of $28-$32 after two weeks. However, the tech company raised the range to $32 and $35 last week, and it priced over that range, giving the company a value of $9.2 billion.
In an interview, Eric Yuan, Zoom CEO, says, “This was a common question … ‘Why do you focus on profitability?’”
Zoom sold 9.91 million shares in the IPO, generating $356.8 million. Current shareholders, which include Yuan, Sequoia, and Emergence Capital sold 11 million more shares.
After the IPO pricing, Yuan told the staff and himself that the price the next day would be out of their control. “Go back to work and make sure we get more customers,” Yuan added.
The IPO market is now growing; Uber declared its IPO filing early this month, followed by PagerDuty and Lyft, and then Pinterest along with Zoom. Meanwhile, Slack and Postmates filed confidentially.
Rishi Jaluria, an analyst at D.A. Davidson, noted on March 25, “We are impressed with Zoom’s rapid growth while generating both cash and GAAP profitability, and enterprise traction.” “Furthermore, our due diligence suggests Zoom is gaining mindshare and could become the de facto standard for video conferencing,” he continued.
Zoom was valued at around 50 times its enterprise worth at its initial price. It is noticeably the highest multiple among the U.S. software companies.