Should Zoom Buy Bitcoin?
Zoom Video Communications, despite holding a substantial $7.7 billion cash reserve, is facing pressure to revamp its treasury strategy. This follows a significant drop in stock price—down 40% in three years—and underperformance against market benchmarks.
Zoom's Post-Pandemic Struggle
Once a pandemic darling, Zoom's post-pandemic performance has been underwhelming. Its five-year forecast lags significantly behind the market, prompting questions about its future growth trajectory. Eric Semler, head of Semler Scientific, describes Zoom as a "zombie company" and suggests a bold solution.
The Bitcoin Proposal
Semler advocates for Zoom to invest in Bitcoin, citing his own company's success with a Bitcoin strategy. Semler Scientific owns 3,192 BTC, including a recent purchase of 871 BTC for $88.5 million. This investment has reportedly doubled the company's stock price over the past year, although attributing this solely to Bitcoin would be an oversimplification.
Zoom, with its $2 billion annual cash flow and access to favorable credit terms, could potentially become one of the largest corporate Bitcoin holders almost overnight. However, this presents a significant risk given Bitcoin's volatility.
Corporate Treasury Strategy in the Crypto Era
Semler's proposal raises a crucial question: how should companies manage their treasury in an era of burgeoning digital assets? Zoom's situation is paradoxical: a healthy 40% EBITDA margin and strong cash generation, yet trading at modest multiples. The company's large cash reserves present both opportunity and risk.
Eric Yuan's Decision
The ultimate decision rests with Zoom CEO Eric Yuan, who holds significant voting power. While companies like Tesla and MicroStrategy have adopted Bitcoin as a hedge against inflation, Yuan has remained silent on the matter. His choice will either reinforce traditional treasury management practices or spark a revolutionary shift in corporate strategy.
Shareholders are seeking clarity and growth, and Zoom finds itself at a crossroads. The core issue is not just about Bitcoin, but whether a fundamentally sound company with stalled growth should enter the volatile cryptocurrency market to boost its performance. The coming months will be critical to observe Yuan's decision and the impact on Zoom's future.
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