Will More Companies follow Zoom’s example?

Zoom just closed a $2billion public offering at $340/share. The company had initially announced raising between $1.5bln and $1.75bln and ended up raising far more than that.

Zoom didn’t really need the cash. According to the CFO, she just “wanted to preserve optimal flexibility for our balance sheet”. The company hasn’t documented their spending plans as yet. Details will most likely be released at the time of their earnings announcement in March.

So why did Zoom raise this cash now? It’s probably because they simply didn’t want to miss out on the opportunity. Zoom is one the major players to profit the most from the pandemic last year. Going from about $69/share before the pandemic to all time high’s at $565/share.

But ever since a covid vaccine was announced the share price hovered in the low 400s, with a forecast of trending downwards.

Zoom didn’t want to miss the boat. Selling new shares at these levels would mean raking in an enormous amount of cash, while they give away a lower proportion of their company. But, this has diluted the value of their shares and lowered their share price to the high 300s.

Makes you wonder whether other companies will follow suit. And if so, what kind of beating will the stock market take?