Eager traders looking to cash in on the coronavirus (COVID-19) pandemic have flocked to purchase shares in video-calling platform Zoom – except some bought the wrong stock.
The US Securities and Exchange Commission (SEC) tweeted Thursday it was suspending trade for Zoom Technologies — a relatively tiny holding company supposedly headquartered in Beijing — due to the confusion.
Zoom Technologies’ subsidiaries reportedly develop games and electronic components for mobile phones, among other things, but the SEC shared concerns that it hadn’t filed a public disclosure statement since 2015.
Zoom Technologies (ticker ZOOM) is NOT the similarly-named popular video communications company. Today the SEC suspended trading in the securities of Zoom Technologies. https://t.co/40zAjWHmY2
— SEC New York (@NewYork_SEC) March 26, 2020
Zoom Technologies share price had skyrocketed from around $3 in mid-February to $20.90 last Friday, a nearly-700% increase.
It’s highly likely investors had intended to buy shares in Zoom Video Communications, a much larger firm that went public last year, responsible for the popular free video calling app Zoom.
Zoom up 30% while rest of market down 50%
Coronavirus lockdown measures across the world have boosted Zoom‘s usage big time. Offices, schools, and universities gone digital have readily adopted Zoom as their video-calling platform of choice, while others have used it to host events like weddings and bar mitzvahs.
This increased demand has sent Zoom Video Communication’s share price from below $80 in January to an all-time-high of $159.56 on March 19.
Beyond the liquidity problems associated with small-cap stocks like $ZOOM, the real problem is the tickers. Tickers are sequences of letters or numbers that stock exchanges use to reference companies in a shorthand manner, often abbreviations.
NASDAQ lists Zoom Technologies, which didn’t make the Zoom app, as $ZOOM, while the ticker for Zoom Video Communications, which did make the Zoom app, is $ZM.
Confusing, right? The people accidentally buying $ZOOM instead of $ZM share your pain. Thing is, this shit has happened before.
Last year, Business Insider reported that Zoom Technologies’ share price had gone from nearly zero to almost $6 just after Zoom Video Communications filed its paperwork to go public — likely the exact same confusion that led to the SEC’s intervention this week.