Zoom Video Communications Inc. plans to join an already active season of initial public offerings, and the videoconferencing company is looking for a high valuation as it seeks to gain more share from legacy-based video communications vendors.
Zoom ZM, +0.00%[1] filed for an IPO in late March[2] and is expected to begin trading on Thursday, with 20.9 million shares to be sold at an expected price of $33 to $35 a share, which was raised Tuesday[3] from a previously expected range of $28 to $32 a share. Underwriters will have the option of an additional 3.1 million shares to cover overallotments. The San Jose, Calif.-based video-first communications platform provider plans to list on the Nasdaq under the symbol “ZM.”
Here are five things to know about Zoom.
It’s close to profitability
Unlike many unicorns launching their IPO, Zoom broke even for it most recent fiscal year on revenue of $330.5 million, with an adjusted profit of 3 cents a share. In the previous year, Zoom posted a loss of 11 cents a share on revenue of $151.5 million.
Sales and marketing expenses were 56% of revenue on the year ended Jan. 31, while they were 54% in the year-ago period.
The valuation is high, and could still zoom higher
Should Zoom price at the top of its range and its overallotment options get exercised, it’s looking at a market capitalization of $9.1 billion. With its most recently reported sales, that puts Zoom at an enterprise value of 27.5 times its annual revenue. That’s a slight premium to Okta Inc. OKTA, +0.41%[4] Atlassian Corp. TEAM, +0.21%[5] Twilio Inc. TWLO, +1.46%[6] and the most recent tech company to IPO, PagerDuty Inc. PD, -0.84%[7] which are in the 24 to 27 range, according to FactSet data.
That, however, isn’t counting if the stock prices above its range or sees its stock rally in its first day of trading, as PagerDuty did in all three cases[8]. Should Zoom price at the top of its range and rally a relatively modest 25%, the company would be valued at just more than 34 times...