SAN FRANCISCO: Pinterest Inc and Zoom Video Communications Inc. hit the public markets in soaring debuts, setting the pace for other so-called unicorns racing toward initial public offerings.
Zoom’s dizzying ascent -- its shares rose as much as 83% before closing up 72% -- left founder and chief executive officer Eric Yuan lamenting the high price and the pressure it puts on the company. That concern arose despite Yuan becoming a billionaire three times over as the video-conferencing company soared to a value of US$15.9bil after its US$751mil IPO. Just two years ago, Zoom was valued at only US$1bil in a private funding round.
“The price is too high,’’ Eric Yuan said in an interview with Bloomberg TV. “Today, wow, there’s a big pop. It is out of our control.’’
Pinterest, the digital-scrapbooking site whose advertisers seek to reach purchase-minded consumers, raised US$1.4bil in its IPO, second only to Lyft Inc for US IPOs this year. Along with Texas oil explorer Brigham Minerals Inc’s US$261 million listing and offerings by two smaller companies, Wednesday was the biggest day of the year for IPOs, with more than US$2.7bil in new shares sold.
Like Zoom, Pinterest priced its shares above its marketed range and began trading on Thursday, closing its first day up 28%. Brigham Minerals trailed those two with a merely solid 11% gain for the day.
The strong showing by Pinterest and Zoom signals continuing investor thirst for new stocks amid a surge of unicorns – startups valued at US$1bil or more – going public. Other high-profile companies with plans to go public or considering it include Uber Technologies Inc, Slack Technologies Inc, Postmates Inc, Palantir Technologies Inc and Airbnb Inc.
Ride-hailing global behemoth Uber is preparing what will likely be the year’s biggest IPO in the US. It will seek to raise about US$10bil in May in a listing valuing it at about US$100bil, people familiar with its plans have said.
“Today’s opening pop in the shares of Zoom and Pinterest suggests that investors are not looking at ‘risky’ unicorns as a group, but instead are valuing each company on their merits,” Alejandro Ortiz, principal analyst at SharesPost Inc, said in a emailed statement.
Fears that Lyft’s sagging stock – it’s fallen 19% from its US$72 IPO price – would bode poorly for other unicorns appear to have been overblown, Ortiz said.
At its highest price on Thursday, Zoom briefly overtook the market valuation of Lyft, which ended on Thursday at US$16.7bil. The jump Zoom’s shares put its valuation above that of Pinterest, with US$12.9bil, and Tradeweb Markets Inc, which raised US$1.1bil in the third-biggest US listing this year and is now valued at about US$8.7bil.
Whether Zoom and Pinterest can hold on to their debut gains will be determined beginning Monday, when the market reopens after the Good Friday holiday and the weekend.
Unlike most of tech unicorns that have gone public or plan to this year, Zoom has made a profit. It reported net income of US$7.6mil for the year ended January on revenue of US$331mil, compared with a loss of US$3.8mil a year earlier on revenue of US$151mil.
Zoom’s financials are “one of the most impressive’’ ever seen by D.A. Davidson in an IPO filing, analyst Rishi Jaluria wrote in a note to clients in March. He said at the time that he wouldn’t be surprised if it reached a valuation of US$10bil to US$15bil on its first day as a public company.
Yuan, Zoom’s CEO, said that he thinks that the San Jose, California-based company can live up to the hype.
“The market opportunity is huge, over US$40bil,’’ Yuan said. “As long as we stay humble, continue working as hard as we can to keep delivering happiness to our customers, I think it will be OK in the long run.’’
Pinterest said in its IPO filing that it now reaches more than 250 million monthly active users globally. The company had about US$756mil in revenue from online advertisements in 2018, a 60% growth rate that accelerated from the previous year. Its net loss shrunk to US$63mil in 2018 from US$130mil in 2017.
Pinterest has a key advantage in competing for advertising dollars, chief executive officer Ben Silbermann said on Thursday in an interview. Unlike other sites, Pinterest users typically are looking to eventually buy what they are searching for, which lines up with what advertisers want, he said.
Most of its user growth, though, is coming from international markets, where the average revenue per user is much lower than in the US. In 2018, more than 80 % of new users were from outside the US. however, they generated about 25 US cents per person compared with US$9.04 for those based in the US.
“We’re going to continue to invest for the long term,” he said. “We’ve shown really good margin improvement over the last few years. My eye is always on what’s going to make Pinterest great three years, five years, 10 years from now.
“That’s going to be how we continue to run the business.” — Bloomberg