Zoom plans $1.5 billion share sale at 10 times its IPO price

Key Points
  • Zoom said on Tuesday that it will sell about 4.4 million shares in a secondary offering to raise $1.5 billion.
  • The company said some of the proceeds could be used for "acquisitions or strategic investments."
  • Zoom is assuming a share price of $337.71, based on Monday's closing price.
Zoom founder Eric Yuan speaks before the Nasdaq opening bell ceremony on April 18, 2019 in New York City.
Kena Betancur | Getty Images

Zoom said on Tuesday that it plans to raise $1.5 billion in a secondary share sale, valuing its stock 10 times above where it debuted in 2019.

The video chat company, which has been a major beneficiary of the remote work boom during the Covid-19 pandemic, is assuming a share price of $337.71, based on Monday's close. Zoom went public less than two years ago, selling shares at $36 a piece. It expects to sell about 4.4 million new shares.

Zoom is taking advantage of a surge in investor interest after the stock quintupled in value last year, when the company's flagship product became a household name. Zoom is already profitable, but the share sale will pad its balance sheet. As of October, the company had $730.5 million of cash and equivalents, up from $283.1 million in January.

Zoom's stock rally in 2020

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

The secondary sale will provide the capital to combine cash and potentially make deals more attractive to targets. Zoom said it plans to use the money for operating expenses and capital expenditures, and "may also use a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services or technologies."

While Zoom's valuation as multiplied 10-fold since its IPO, the company is significantly off its high. Since peaking at $568.34 in mid-October, Zoom shares have dropped more than 41%, taking their biggest hit on reports that Covid-19 vaccines were highly effective and would be rushed to market.

Zoom's revenue growth has topped 350% in each of the past two quarters, and the company said in its latest earnings report in November that fiscal fourth quarter growth will approach 330%. By mid-year, growth is expected to moderate dramatically as the company has to deal with much tougher comparisons and the likelihood that people will be returning to the office.

Zoom shares rose 5.7% to $356.81 at the close on Tuesday.

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