With the COVID-19 pandemic in full force and racial unrest sweeping the country, this might seem like a tough time for an initial public offering.
But for the right company, it could be a great time. Just ask Henry Schuck, founder and chief executive of ZoomInfo Technologies. His company, whose subscription software feeds business leads to marketing and sales professionals, entered the public market this week by selling 44.5 million shares to investors at $21 apiece. That’s above its previous guidance of $19 to $20 a share. That means ZoomInfo could count on raking in nearly $900 million from investors before its stock started trading on the Nasdaq exchange Thursday in an IPO that valued the company at more than $8 billion.
That value would only increase: By the time the market closed on Thursday, the share price had risen 62 percent to $34.
Like much of the economy, the IPO market has largely been closed during the pandemic — only biotechs, blank-check firms, and companies from China need apply. This week represents an important turning point: It’s the busiest week of the year for IPOs so far, according to Renaissance Capital, and ZoomInfo and Warner Music have brought two blockbusters to the market.
Craig Marcus, cohead of the capital markets group at Ropes & Gray, noted that June is typically a busy time in the IPO market in past years, as companies race to get deals done before summer vacations. Some of these would-be public firms were spooked by the stock market gyrations in March and April. But stocks have stabilized in recent weeks.
“I think we’re starting to see the ice break a bit,” Marcus said. “There’s a big pipeline of deals ... waiting in line for the opportunity.”
ZoomInfo, which is on track for more than $400 million in annual revenue based on its first-quarter performance, is not a household name yet — even though it’s now the biggest tech IPO of the year so far. Don’t confuse it with Zoom Video, the now-ubiquitous provider of streaming conference calls. Like Zoom Video, ZoomInfo has the potential to thrive during the pandemic: While business dinners and trade shows are all but verboten, many companies have no choice but to go all-digital to pitch their products and services to would-be buyers.
It also has an important local connection: The original ZoomInfo (formally and formerly called Zoom Information Inc.) started here in Waltham but was acquired by Shuck’s company, DiscoverOrg, in February 2019; about 500 people typically work in the old headquarters overlooking Route 128, out of a workforce of roughly 1,300.
Another local connection: Boston private equity firm TA Associates became a minority owner in DiscoverOrg in 2014, and remains a key investor.
Since renamed ZoomInfo and based in Vancouver, Wash., the company reported that it nearly doubled its new business, as measured by annual contract value, in April. One reason cited in the document: traditional sales channels (i.e. in-person meetings) were “less feasible” that month, to put it mildly.
It’s "not the backdrop anybody hopes for when they IPO,” Schuck said. “But we were excited about the opportunity to open the markets back up to technology IPOs in 2020.”
Matthew Kennedy, a senior equity strategist at Renaissance Capital, said ZoomInfo IPO could perform well even in a weak market because of its unusual combination of profitability and solid sales growth. Meanwhile, rising stock values since late March have helped encourage companies to wade into the public markets again, he noted, even though it might seem counterintuitive given the broader economic challenges facing the country. And companies are getting adept at doing their “road shows” — pre-IPO presentations to investors — virtually instead of in person.
“As long as volatility stays low and the market doesn’t collapse, I think the summer and fall are going to be a better time to go public than a lot of people thought even a few months ago,” Kennedy said. “It will still be difficult for companies that are negatively impacted by the coronavirus. Investors are not going to want to deal with those problems going forward, or are going to expect a severe valuation cut for taking on some of those risks.”
Peter Cohan, a management lecturer at Babson College, said he expects the IPO market will in large part gauge the potential winners and losers during the pandemic. “Any company that has accelerated the way that people are working in the world of COVID-19 is a potential IPO,” said Cohan. With the overall stock market volatility dissipated for now, he said “people go from being afraid of losing all their money … to being afraid of missing out on an opportunity.”