Coming Public in a Pandemic

Not all businesses have reopened their doors, but Wall Street is certainly humming again. Investors have unreservedly bid up stocks to nearly their pre-pandemic levels and have shown themselves ready to load up on some of the riskier paper out there, IPOs. Shares of sales and marketing software vendor ZoomInfo priced above expectations and then surged some 70% in their debut Thursday.

ZoomInfo's IPO represents the first offering by an enterprise tech company in the pandemic-plagued year of 2020. (To be clear, we are counting only listings on US exchanges and excluding blank-check deals and biotech offerings.) For comparison, at this point in 2019, we already had seen four IPOs from B2B vendors. Last year's pace picked up from there, with our full-year 2019 count of enterprise tech debuts hitting 13, in line with previous years' pace of about one new tech offering each month.

Of course, those recent years didn't have to face anything like COVID-19, which has emerged as the most severe threat to global health and economic growth in several generations. As a sign of the times, 'COVID-19' appears 34 times in ZoomInfo's most recent version of its prospectus, including in the 'risks' section. The company sought to at least partially de-risk the pandemic by the unusual inclusion of intra-quarter results from April. (According to the prospectus, ZoomInfo generated a record amount of annual contract value from new customers in April.)

More broadly, the firm's financials look like the kind that tech investors would buy, even in a global pandemic. ZoomInfo is doubling sales, while running at a strong gross margin above 80% and posting only a nominal loss. In contrast, another tech company that's roughly the same size as ZoomInfo – but growing slower and losing more money as it sells into an industry hit hard by the coronavirus slowdown – had to take a detour on its journey to Wall Street.

Both ZoomInfo and construction software provider Procore Technologies revealed their prospectuses in late February, just as the coronavirus outbreak was starting to hit business and life. ('Coronavirus' appears just once in Procore's original S-1, filed with the SEC on February 28, and not at all in ZoomInfo's initial paperwork filed a day earlier.)

Instead of raising money from public investors, however, Procore reportedly tapped a private backer last month for additional capital. That's on top of the $383m the company has already raised over nine rounds of funding. Although Procore hasn't updated its three-month-old SEC filing, it could still come public when the coronavirus pandemic further recedes.