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Profitable Zoom Video Tops $9 Billion Valuation After IPO

Olivia Zaleski and Elizabeth Fournier
Profitable Zoom Video Tops $9 Billion Valuation After IPO

(Bloomberg) -- Profitable video-conferencing provider Zoom Video Communications Inc. will be valued at more than $9 billion in its public market debut Thursday, more than nine times the amount it fetched in a private funding round just two years ago.

Zoom raised $751 million in an initial public offering Wednesday, selling 20.9 million shares Wednesday for $36 each, according to data compiled by Bloomberg.

The listing is set to be fourth biggest in the U.S. so far this year, after Lyft Inc.’s $2.34 billion IPO and Tradeweb Markets Inc.’s $1.24 billion offer in March. Digital scrapbook company Pinterest Inc. is seeking to raise as much as $1.27 billion in its IPO Wednesday.

Uber Technologies Inc., whose IPO is expected to take place in May, is likely to be the largest in the U.S. this year. Uber is seeking to raise about $10 billion in an offering valuing it at about $100 billion, people familiar with its plans have said.

Zoom is one of the few tech unicorns set to go public this year that 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.

Climb Predicted

Zoom’s financials are “one of the most impressive’’ D.A. Davidson has ever seen in an IPO filing, analyst Rishi Jaluria wrote in a note to clients in March, adding 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.

The company has said its mission is to make video communication “frictionless,” as more employees work remotely and use conferencing services to connect with coworkers. International Data Corp. has estimated that the segments of the market in which Zoom operates could be worth as much as $43.1 billion by 2022, according to a regulatory filing.

Its customers include Uber, which averaged 14 million minutes per month spent in Zoom meetings in 2018, as well as media company Discovery Inc. and software maker VMware Inc.

Possible Risks

Still, the business isn’t without risks. Though the standard disclaimer in many IPO documents -- that the company may never be profitable -- is missing, Zoom cites increased competition, service outages and cybersecurity threats as concerns that investors should be aware of, acknowledging that its security measures have been compromised in the past and could be again.

Zoom also notes its large research and development operations in China, where it employed more than 500 people as of January. This, it said, could expose the company to “market scrutiny regarding the integrity of our solution or data security features,” especially against the backdrop of the Trump administration’s continued efforts to close a trade deal with China.

The offering was led by Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc. and Credit Suisse Group AG. Zoom had initially marketed shares for $28 to $32 each before increasing the range to $33 to $35 per share. The stock is set to trade on the Nasdaq Global Select Market under the ticker ZM.

(Updates throughout, including valuation in first paragraph.)

To contact the reporters on this story: Olivia Zaleski in San Francisco at ozaleski@bloomberg.net;Elizabeth Fournier in New York at efournier5@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, ;Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha, Matthew Monks

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