If it's a verb... It needs no intro. Flashback to December 2019: WFH days are a rare perk, masks are for spa days, and Zoom stock is trading at $65. Flashforward to October 2020: WFH is a meme-ified norm, masks are for all days, and Zoom stock is trading at $560. Oh, and its quarterly profit has increased 3,300% from 2019.
- But Zoom has been kind of muted lately... Now that Covid-19 vaccines are being administered, shares have fallen to $357. And Zoom wants to cash in before it's too late.
- Zoom plans to sell 5M+ new shares to raise $1.75B in fresh cash. Since more shares are being introduced, Zoom stockholders will own less of the overall company — that dilutes the value of exisiting shares.
Conference FOMO... Zoom hasn't cashed in on its soaring share price yet. When you buy a company's stock, the company isn't getting your dollars. The $$$ goes to the random other investor you bought the stock from (just like when you sell, it goes to you). But these new share sales are kind of rare for public companies (though Tesla has announced two this year), because no one wants dilution. So why is Zoom doing this now?
Zoom could be gearing up to invest... in a "return-to-work" hedge. Zoom doesn't have a cash problem: on October 31, it had $1.9B in cash, according to its latest earnings. So this share sale isn't a needy cash grab. Zoom is the ultimate WFH stock - that's both its greatest strength and its greatest vulnerability. Now it could be gearing up to invest in (or even acquire) a "return-to-normalcy" hedge. We're thinking it should launch a remote co-working space called ZWork.