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Jun 4, 2020

Zoom's 484% surge gives little-known early investor a fortune

Mike Newton discusses Zoom

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Some of the biggest names in finance and business made a fortune on Zoom Video Communications Inc.: Hong Kong’s Li Ka-shing, Tiger Global Management’s Chase Coleman and, of course, founder Eric Yuan, whose net worth has surged to US$10.7 billion.

And then there’s Samuel Chen, a little-known Taiwanese investor who made his initial wealth through ink trading and started putting money in the video-conferencing juggernaut about a decade ago.

His Digital Mobile Venture Ltd., which participated in Zoom’s early funding rounds, controls a US$1.6 billion stake, assuming it hasn’t sold stock since the holding was last disclosed at the end of March.

Shares of Zoom, which recently reported a 170 per cent increase in first-quarter revenue, have more than quintupled since their initial public offering last year.

Chen is also a board member of Taiwan circuit maker Sonix Technology Co., and Digital Mobile is the biggest shareholder of Santa Clara, California-based Telenav Inc., a maker of navigation software.

He keeps a low profile and doesn’t give interviews. Shumin Huang, a spokeswoman for Sonix, said he doesn’t engage in that firm’s daily operations. With respect to the Zoom investment, he considers himself lucky, she said.

For that, Chen can thank Telenav Chief Executive Officer H.P. Jin, who introduced him to Yuan, according to a person familiar with the relationship.

Jin knew Yuan from when they played soccer together on weekends in the San Francisco area, and he invested alongside Chen in Zoom’s early financing rounds partly because of how Yuan conducted himself on the pitch.

“The way you behave on the soccer field is very important,” said Jin, who estimates his Zoom stake is worth more than US$100 million.

Analysts Split

Chen’s investment firm has already sold some Zoom shares, including a US$22 million chunk at Zoom’s April 2019 IPO and an additional 13 million shares through March, according to a filing.

That means it could have earned a windfall of as much as US$2.1 billion.

Analysts tracked by Bloomberg are split on the stock’s prospects.

A dozen recommend that investors buy the shares, 13 have hold ratings and five say sell. Zoom’s surging popularity has come with concerns over its security practices, prompting the company to bolster protective measures for users.

There’s also the risk that people will abandon the service after the pandemic ends and they return to the workplace en masse.

On the other hand, Zoom’s cloud-based phone offering is a “significant opportunity” that could set it up as a unified communications provider, Alex Zukin, an analyst at RBC Capital Markets, said in a note to clients this week in which he upgraded the shares to a buy.

There’s “still money to be made in the stock,” he said.

Chen and other investors made initial investments in Zoom in 2011, according to a post last year on Medium by Louis Li of venture-capital firm TSVC, formerly known as TEEC Angel Fund.

A year later, as Zoom burned through its seed funding and few venture-capital funds showed interest, Chen stepped in to lead a series A round.

The investor, now in his late 60s, left Zoom’s board in 2018, four years after Digit Mobile Inc., a Taiwan-based company where he serves as chairman, brought the service to the island.

Chen, who received a bachelor’s degree in chemistry from Taiwan’s National Tsing Hua University, earned his early fortune through a business trading ink, according to a book on successful former students published to celebrate the college’s 100th anniversary.

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