By: Emily Aziz
Investors eager to benefit from the COVID-19 pandemic rushed to purchase shares of Zoom, a video-calling platform that has seen an increase in surge share prices due to COVID-19. Many traders, however, purchased the wrong stock. On March 25, 2020, the Securities and Exchange Commission (“SEC”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Act”), of trading in the securities of Zoom Technologies Inc. due to this confusion.
Under Section 12(k) of the Act, the Commission is authorized to suspend trading in any security for a period not exceeding 10 business days if, in its opinion, is necessary to protect the public interest and investors.
Zoom Technologies, a Delaware Corporation that has its principal executive offices in China, primarily engages in technology and communication businesses. The company has not filed a public disclosure statement since 2015. Because of this, the SEC had concerns about the adequacy and accuracy of publicly available information concerning Zoom, including its financial data. Zoom Video Communications, on the other hand, has become incredibly popular amid the coronavirus pandemic as more people work or study from home, and as a result, have become reliant on videoconferencing for maintaining day-to-day communications.
According to Business Insider, the shares of Zoom Video are up roughly 116 percent year-to date. Zoom Technologies stock was up more than 800 percent year-to-date before its trading halt. This is not the first time this mix up between the two companies has occurred; In April 2019, Zoom Video went public and Zoom Technologies rallied nearly 100% on the initial public offering day despite, again, not having released any new financial information.
The temporary suspension ends on April 8, 2020 at 11:59 PM.
CITATIONS:
Securities Exchange Act Section 12(k), 15 U.S.C. § 781(k) (1988)
Order of Suspension of Trading, Zoom Technologies, Inc., No. 500-1 (Securities Exchange Comm’n March 25, 2020)
Jonathan Garber, A company called Zoom Technologies is surging because people think it’s Zoom Video Communications (ZOOM, ZM), Markets Insider (Apr. 18, 2019 10:57 AM) https://markets.businessinsider.com/news/stocks/publicly-listed-zoom-video-communications-traders-buying-zoom-technologies-2019-4-1028122561?utm_source=markets&utm_medium=ingest
Ben Winck, The SEC stopped trading on an over-the-counter stock because people were confusing it with Zoom Video, which has soared amid the coronavirus lockdown, Market Insider (Mar. 26, 2020 12:33 PM) https://markets.businessinsider.com/news/stocks/zoom-technologies-stock-halted-sec-confusion-with-zoom-video-coronavirus-2020-3-1029036453
Jessica Bursztynsky, SEC pauses Zoom Technologies trading because people think it’s Zoom Video, CNBC (Mar. 26, 2020 11:57 AM) https://www.cnbc.com/2020/03/26/sec-pauses-zoom-technologies-as-traders-confuse-it-with-zoom-video.html
David Canellis, SEC halts $ZOOM after coronavirus traders confuse it for Zoom app, The Next Web (Mar. 27, 2020 2:12 PM) https://thenextweb.com/hardfork/2020/03/27/sec-halts-zoom-after-coronavirus-traders-confuse-it-for-zoom-app/
Photo: Courtesy of Forbes