ZM - The dilution

The future dilution, from the S-1:

The number of shares of our common stock that will be outstanding after this offering and the concurrent private placement …excludes:

35,064,465 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock outstanding as of January 31, 2019, with a weighted-average exercise price of $1.48 per share (other than 283,177 shares to be issued upon exercise of options to purchase Class B common stock by certain selling stockholders and the subsequent conversion of such shares into an equivalent number of shares of our Class A common stock in connection with the sale of such shares by such selling stockholders in this offering).

1,147,500 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock granted after January 31, 2019, with a weighted-average exercise price of $26.09 per share.

58,300,889 shares of our Class A common stock reserved for future issuance under our 2019 Equity Incentive Plan (2019 Plan), which will become effective in connection with this offering, including 34,000,000 new shares plus the number of shares (not to exceed 24,300,889 shares) (“I”) that remain available for grant of future awards under our 2011 Global Share Plan (2011 Plan), which shares will be added to the shares reserved under the 2019 Plan upon its effectiveness and (“II”) any shares underlying outstanding stock awards granted under our 2011 Plan that expire, or are forfeited, cancelled, withheld or reacquired; plus an annual evergreen increase, as more fully described under the terms of the 2019 Plan described in the section titled “Executive Compensation—Equity Plans”;

and 9,000,000 shares of our Class A common stock reserved for future issuance under our 2019 Employee Stock Purchase Plan (ESPP), which includes an annual evergreen increase and will become effective in connection with this offering.


Just thinking about all those shares scares the willies out of me.

Saul

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Agree Saul - I was reading that on Seeking Alpha and felt the same way. Atlassian’s 5% stake is probably the closest I want to get to playing Zoom right now.
A

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For real, why wouldn’t you just assume that a significant portion of those outstanding shares will get dumped as soon as they can be – lock-up, one-year capital gains, etc. – and short this stock with a sufficient timeframe to account for that sale-ability?

Let’s assume a least-worst-case scenario of one-third of the above. That’s 34.5 million shares being sold and represents close to 15% of the outstanding shares as of today. And I don’t think that includes whatever the big institutional and other investors (including TEAM’s 5% chunk) would also sell.

There’s no way that doesn’t drive the price down. Or maybe I’m the delusional one…

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For real, why wouldn’t you just assume that a significant portion of those outstanding shares will get dumped as soon as they can be – lock-up, one-year capital gains, etc. – and short this stock with a sufficient timeframe to account for that sale-ability?

Let’s assume a least-worst-case scenario of one-third of the above. That’s 34.5 million shares being sold and represents close to 15% of the outstanding shares as of today. And I don’t think that includes whatever the big institutional and other investors (including TEAM’s 5% chunk) would also sell.

There’s no way that doesn’t drive the price down. Or maybe I’m the delusional one…

because if their growth rate increases to 125% over the next year, the stock price could go up a lot, even from here, even with all that dilution.

I have no confidence that they will definitely grow at such a high rate (If I did I would be buying the stock now), but it’s possible. They’re already growing at 100%+ and we’ve seen many other SaaS companies increasing their growth rates even as they get larger, from already sky high growth.

That’s the risk you would be taking

-mekong

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Having no faith that they can grow enough to offset that dilution AND grow into their valuation is not the same as having faith that they won’t.

Being in the first group, I sit on the sidelines. Being in the second and betting against the irrationality of the market would cause one to short the stock. I’m not that bold.

Justin