Zoom CFO Opts for Equity Raise Instead of Debt Sale to Keep Options Open

Zoom Video Communications Inc.

The CFO decided to raise capital rather than sell debt because the software company needed additional funds to expand its operations.

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San Jose, California-based Zoom, which has seen demand for its videoconferencing services rise sharply during the coronavirus pandemic, said Friday it had closed its stock offering after selling $2 billion worth of shares at $340 a share.

The company originally planned to raise between $1.5 and $1.75 billion from investors, but had to raise more due to strong demand for its shares, according to the company’s chief financial officer.

Kelly Steckelberg

said.

I wanted to keep our balance sheet as flexible as possible, Steckelberg said, adding that Zoom does not provide funds for specific investments, so it provides equity rather than selling debt.

Steckelberg said the capital increase, the first since the company’s IPO in 2019, roughly doubled Zoom Holdings’ liquidity.

Zoom CFO Opts for Equity Raise Instead of Debt Sale to Keep Options Open

Kelly Steckelberg, Chief Financial Officer of Zoom.

Photo:

Zoom Video Communications Inc.

The fresh capital will likely be used to expand the company’s sales and marketing staff and its data centers, Steckelberg said. Last year, Zoom announced that it would expand its R&D capabilities in Singapore and Bangalore, India. According to Ms Steckelberg, some of the money could also be used for mergers and acquisitions.

She added that Zoom will provide more details on its spending plans when it meets on 1. March published his findings.

The Company posted good results in the last quarter ended December 31. The month of October ended. Total revenues were $777.2 million, an increase of more than $600 million over the prior year. Operating income was $192.2 million, compared to a loss of $1.7 million for the same period in 2019. At the end of October, Zoom had about $70 million in debt, according to the

S&P Global Inc.

According to analysts, fundraising in this area is similar to other areas.

Many software companies have raised capital in one way or another, says Dan Romanoff, equity analyst at Morningstar Research Services LLC, a research services firm. Some of these companies have sold debt that will then be converted into shares, Romanov said.

Zoom will likely use some of its capital for mergers and acquisitions or additional infrastructure investments, said Tom Roderick, an analyst at Stifel Financial Corp. an investment banking firm.

The company could be on the lookout for targets selling collaboration tools and could help Zoom compete with rivals such as

Cisco Systems Inc.

Webex or…

Microsoft Corporation

Teams. You’re dealing with highly capitalized competitors, Roderick said.

According to Ms. Steckelberg, Zoom will conduct future fundraisers, such as the recent one, remotely. I can’t imagine it would have been any different, she said, adding that virtual meetings with bankers and investors were very effective during the pandemic.

Please email Nina Trentmann at [email protected].