ZoomInfo (Nasdaq: ZI) was the first major IPO of the coronavirus era, and it had a strong debut, finishing 60% higher and raising $935 million. The stock's IPO was priced at $21 which was already an upgrade above the expected range of $15 to $18 in May, but its strong close signaled investors' appetite for cloud-based, software as a service stocks. The stock closed at $34 which gives it a market cap of $13 billion.
These stocks were some of the biggest gainers during the previous leg of the bull market from December 2018 to February 2020. And even after the coronavirus crash, they have posted some of the strongest gains with many already exceeding their previous highs. Companies in this sector have a very high valuation, but they are also growing rapidly and have high margins. If this performance persists, then it projects to massive earnings in the future.
Company Information
ZoomInfo uses artificial intelligence to help sales teams to identify potential customers and improve with outreach. It's built on top of existing enterprise software from companies like Salesforce (Nasdaq: CRM), Microsoft (Nasdaq: MSFT), and Oracle (Nasdaq: ORCL). It already has 15,000 customers and expects its total addressable market to be $24 billion.
In the first quarter of the year, ZoomInfo lost $5.9 million on revenue of $102 million. The company's sales grew by nearly 40% over the past year. Only time will tell whether these types of cloud-based, enterprise stocks are recession-proof, but ZoomInfo is in a good position to survive since it can help companies increase revenues which becomes more paramount in recessions. Additionally, its software subscription is relatively cheap compared to the additional revenue it can bring to a company. In its IPO roadshow, the company pointed out numerous examples of helping companies that saw its revenues plunge during the coronavirus shutdown to find new customers in adjacent industries.
For its IPO, the lead underwriters were Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS). Major shareholders of the company include TA Associates and Carlyle Group. Following the IPO, 89.6% of the shares are owned by CEO Henry Schuk, private equity, and insiders. Fidelity Investments, Blackrock (NYSE: BLK), and Dragoneer Investment Group each bought $100 million of shares at the IPO price.