Zoom to raise USD1.5 billion for “acquisitions or strategic investments”

Zoom, the video chat company, announced its plans to raise USD1.5 billion in a secondary share sale at 10 times above its IPO price where it debuted in 2019. It expects to sell about 4.4 million new shares.

The company’s flagship product became a household name during the Covid-19 pandemic and is taking advantage of a surge in investor interest after the stock quintupled in value last year. As of October, the company had USD730.5 million of cash and equivalents, up from USD283.1 million in January. With a market cap of close to USD100 billion, Zoom has the equity to make significant acquisitions.

The secondary share sale will provide the capital to combine cash and eventually make strategic deals more attractive to targets.

According to Zoom, they plan 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.

Since peaking at USD568.34 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.