The SEC Really Wants Investors to Stop Buying the Wrong Zoom Stock

As the unprecedented COVID-19 pandemic continues to rage across the globe, life has been utterly upended -- including how people work. Some companies are seeing demand for their services skyrocket as the world adjusts to this new reality. With businesses asking as many employees to work from home as possible, that has driven skyrocketing usage of Zoom Video Communications(NASDAQ: ZM) videoconferencing platform (including here at The Motley Fool).

"I'd also like to address the global impact we are seeing from the coronavirus," CEO Eric Yuan said on the last earnings call. "While this tragic situation is very fluid, Zoom is focused on using our resources to help alleviate some of the disruption and communication challenges as an alternative to in-person meetings for our employees, customers, and community."

Zoom Video is one of the few stocks that has jumped amid the crisis while the broader market tanked. There's only one problem: Many investors are buying the wrong Zoom stock.

Person videoconferencing using Zoom platform on a laptop

Zoom Video trades under "ZM," not "ZOOM." Image source: Zoom Video.

Regulators to the rescue

Zoom Technologies (OTC: ZOOM) has also enjoyed massive upside over the past month or so, with shares setting an all-time high of $60 a week ago. The stock had closed out 2019 at $1.05. ZOOM Chart

ZOOM data by YCharts.

Unfortunately, Zoom Technologies is an apparently defunct company based in China that previously distributed wireless communications products. It appears that it no longer operates and does not generate revenue. Perhaps adding to the confusion, Zoom Technologies did previously own the domain name before Zoom Video eventually bought it in 2018 from domain broker Media Options.

The situation has gotten so bad that the SEC has decided to step in. In the interest of protecting confused public investors that are buying the wrong stock, regulators have announced that trading in Zoom Technologies has been suspended. In a release, the SEC said:

The Commission temporarily suspended trading in the securities of ZOOM because of concerns about the adequacy and accuracy of publicly available information concerning ZOOM, including its financial condition and its operations, if any, in light of the absence of any public disclosure by the company since 2015; and concerns about investors confusing this issuer with a similarly named NASDAQ-listed issuer, providing communications services, which has seen a rise in share price during the ongoing COVID-19 pandemic.

It's unclear when Zoom Technologies shares will resume trading (if ever). But considering the fact that the stock is nothing more than an empty shell, it's probably for the better. Investors interested in the booming videoconferencing company should make sure they type in "ZM" when placing those buy orders.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications and recommends the following options: short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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