For Zoom, $1.5B second IPO looms

Zoom announced a new $1.5 billion secondary share sale, taking advantage of a share price now ten times its value in the platform's 2019 IPO.

Zoom's share prices have dropped, though, by 41% since a mid-October peak at $568.34, as investors worry how the platform will adapt to expanding free users and a vaccine.

Eric Yuan's company is planning a secondary listing of about 5.15 million shares at a share price of $340, saying it could use some of the proceeds for "acquisitions or strategic investments."

The offering, which represents a 4.7% discount on the company's last closing price, is expected to close around the end of this week.

The sale is run by JP Morgan Chase, which has a 30-day option to buy up to 735,924 extra shares at the offering price, too.

The total market for Zoom "could exceed $47 billion by 2024, and that the market opportunity for Zoom Phone specifically could exceed $23 billion by 2024," the company said in an online prospectus filed with the US Securities and Exchange Commission.

The company's full-year revenue was $622 million in 2020, with a net income of $25.3 million.

But the San Jose-based company also admitted it faces challenges.

The increased use of its services in the pandemic, while it has made Zoom a household name, has also increased its operating costs as the platform expands its own data centers and makes more use of third-party cloud hosting.

And "a significant portion" of the Zoom boom during coronavirus comes from free accounts and school usage (from which it has removed the 40-minute time limit), which don't generate the company any revenue.

All this "recent increase in usage of our platform has adversely impacted, and may continue to adversely impact, our gross margin," Zoom says in the prospectus.

IPO boom

With central banks keeping rates at historic low levels, it has been a boom season for public listings.

Companies also racing to offer shares to investors now include online greeting cards company Moonpig, which has launched a £1 billion IPO. Its sales figures during the pandemic have soared, as have those of Deliveroo, also eyeing a listing.

San Francisco-based online consumer lender Affirm, led by PayPal co-founder Max Levchin, has raised $1.2 billion in its public listing this week, constituting an early, and encouraging, early test of investors' continued appetite this year for tech listings.

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E-commerce site Poshmark and mobile gaming company Playtika are also planning first listings in the coming days.

It extends a hot run of tech IPOs that began halfway through 2020.

More IPOs doubled in value during their opening days last year than any year since 1999.

AirBnB's December listing, which doubled from an IPO price of $68 to a first-day close of $144.71, brought in $3.5 billion.

A bit earlier, in September, Snowflake became the largest software IPO of all time, raising just a feather less at $3.4 billion.

Zoom after me

Zoom expects its own growth to moderate after its period of stratospheric growth.

But there is some chance that remote working and meetings will remain part of our lives even after coronavirus.

Eyeing this market are the London-based online events platform Hopin, valued at $2.1 billion in its Series B round in November.

And companies like Teamflow, which is trying to engineer virtual workspaces with some of the more fun and serendipitous bits of office life.

So, as happened previously with Uber, the race will also be on to find the "next Zoom."

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— Padraig Belton, contributing editor, special to Light Reading