Zoom Video Communications (NASDAQ:ZM) is calling on the stock market for $1.5 billion in fresh capital. The popular video conferencing services provider announced Tuesday that it is floating a new issue of its Class A common stock to bring in that amount.
Additionally, JPMorgan Chase unit J.P. Morgan, the underwriter of the issue, has been given an option to purchase up to an additional $225 million worth of shares. The option will be in force for 30 days.
At the most recent closing stock price, $1.5 billion would amount to just over 4.2 million Zoom shares in total.
In its regulatory filing on the issue, Zoom said that it mainly intends to use the funds to "increase our capitalization and financial flexibility." It said it would consider devoting portions of these to acquisitions of complementary assets, although it stressed it has no concrete plans in this regard just now.
IMAGE SOURCE: GETTY IMAGES.
The company is taking advantage of a steep price increase in its stock to raise the new capital. A standout performer during the coronavirus pandemic -- which has necessitated a dramatic increase in remote work, school classes, and social gatherings -- Zoom's shares have increased nearly fivefold over the past year, despite several dramatic price pullbacks.
Share dilution is always a concern with secondary stock issues, but this one is dwarfed by Zoom's current $102 billion-plus market capitalization.
While the company's shares slumped on Tuesday following the announcement of the share flotation, they ended up closing 5.7% higher. The stock issue announcement was overshadowed that day by the company's very positive news about the rapid growth of its Zoom Phone platform.
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