Zoom Stock Surges 81% On First Day Of Trading

More than living up to its loud IPO hype, video conferencing company Zoom Video Communications opened its first trading day at the NASDAQ Thursday at $65 per share, an eye-popping 80.6 percent above its IPO price.

The stock hit a high of $66 before closing at $62, or up 72 percent. At this closing price Zoom had a stock market value of $15.9 billion.

On Wednesday, Zoom priced its IPO at $36 per share, slightly above its target range of $33 to $35 per share. At this opening price, Zoom was valued about 50 times its enterprise value. This is, by far, the highest multiple for a U.S. software company.

Zoom raised $356.8 million after selling 9.91 million shares in the IPO. Existing shareholders, including Emergence Capital and Sequoia Capital sold another 11 million shares.

Hopes are high Zoom can hang-on to this heart-warming level tomorrow and into next week despite fears it might “do a Lyft” and tank during its first full week at Wall Street.

What sets Zoom apart from the bevy of tech companies slated to IPO in 2019 is that it’s profitable, a rare feat for any tech firm, unicorn or not. Zoom posted $7.58 million in net income in 2018 while revenue ballooned by 118 percent to $330.5 million.

“This was a common question...‘Why do you focus on profitability?’” asked Zoom CEO Eric Yuan during the IPO roadshow.

On Wednesday, Yuan said he told himself and staff “the price tomorrow is out of our control...I said, ‘Go back to work and make sure we get more customers.’”

Some analysts already had high hopes for Zoom before its trading debut.

“We are impressed with Zoom’s rapid growth while generating both cash and GAAP profitability, and enterprise traction,” said Rishi Jaluria, an analyst at D.A. Davidson in a note to investors March 25.

“Furthermore, our due diligence suggests Zoom is gaining mindshare and could become the de facto standard for videoconferencing.”

Based in San Jose, Zoom provides remote conferencing services using cloud computing. It offers communications software that combines video conferencing, online meetings, chat, and mobile collaboration. Its software has the ability to host video conferences involving up to 500 persons.