Today we find out what the financial markets think of ZipRecruiter.

Management thinks the stock is worth $25.04 a share, giving the company a $3.3 billion valuation. In January, 50,000 shares were sold in a private sale at $9 a share. In November 2020, almost 3 million shares changed hands at $6.36.

Of more value to analysts and stock traders was ZipRecruiter’s first quarter financial report and the guidance it offered for Q2 and the year ahead. On revenue of $125.4 million, the company had net income of $13.4 million and adjusted earnings (EBITDA) of $20 million.

Of greater interest is the company’s expectation it will grow revenue in the current quarter (ending June 30) to $157 million-$160 million. Largely due to the estimated $21.6 million cost of going public and, as stated in a shareholder letter, “increasing investments in building our brand,” ZipRecruiter will report an adjusted loss between $16 and $20 million.

The company also provided full year guidance in its financial report, estimating it will see revenue of $580 to $600 million and earn an adjusted $20 to $28 million.

ZipRecruiter

What this says is that the Q1 earnings will carry ZipRecruiter for much of the year. Revenue in the back half of 2021 is not expected to grow much from the first half. That seems a realistic assessment of the U.S. economic and employment recovery from the Covid pandemic.

In shareholder letter signed by CEO Ian Siegel and CFO David Travers, they say, “we presume a gradual return to a more traditional macroeconomic pattern by the end of the year.”

They go on to say, “The macroeconomic outlook and the shape of the recovery remains uncertain; however, we believe that the economy is in the early phases of expansion after the COVID pandemic-driven downturn. In that context, our operating assumption is that, following a robust macroeconomic recovery in the first half of 2021, our growth will moderate in the second half of the year.”

Whatever brand-building investments and other initiatives the company undertakes this year will be funded out of operating income. Unlike more traditional IPOs, ZipRecruiter’s is a direct listing. That means it won’t be issuing any stock itself and therefore won’t see any influx of capital to fund growth and other programs.

“Given the strength of our balance sheet and cash flow generation over the past three quarters, we believe we have the capital we need to invest in our business as the economy reopens without raising additional equity,” explain Siegel and Travers in the shareholder letter.

Why then is ZipRecruiter going public? To give its investors and employees the ability to sell the stock they hold. Like so many startups, ZipRecruiter has been issuing stock to employees. Until today, their only option for cashing in was to sell the stock to a private buyer or, more typically, back to the company at a pre-determined price.

Now, there’s a public marketplace. Just under 86.6 million shares are potentially available for resale, according to ZipRecruiter’s filing with the Securities and Exchange Commission. As of May 21, the company reported there were 73.8 million shares of Class A common stock outstanding.

Once a rare phenomenon, direct listings are becoming more common. They offer several advantages that are particularly attractive to young companies, not the least of which is the avoidance of the substantial underwriting fees and discounts charged by investment banks.

Direct listing also avoids lock-up periods which limit the ability of key shareholders to sell stock immediately upon going public. ZipRecruiter’s biggest shareholders – including Institutional Venture Partners and CEO Siegel, which hold 21.2% and 13.5% of the Class B shares respectively – will be able to sell their shares when they see fit.

Class B shares can be converted into an equal number of Class A shares. Class A are the only shares that will be publicly traded. Class B shares hold the voting power, each share equal to 20 votes. Class A holders get one vote per share.

In the last week, many of the larger shareholders have been converting their Class B stock into Class A, presumably with the intention of selling.

In a tradition that’s been updated by the digital age and by pandemic caution, ZipRecruiter employees will gather at dawn at the company’s Santa Monica, California headquarters for the ceremonial ringing of the opening bell to mark the start of trading at the New York Stock Exchange.

With the dinging of the bell will start a new era for a company born around a kitchen table.

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