ZipRecruiter (NYSE: ZIP) is a recruitment site matching employers and suitable job candidates. It’s been featured in many major publications including The Wall Street Journal, Forbes, and Time. It began back in 2010 to assist small business owners advertise their job postings affordably. And during the decade since, has grown into a thriving marketplace to rival many big players including Monster and Indeed.
The company is going public this week via direct listing. It will list on the New York Stock Exchange under the ticker symbol ZIP.
A direct listing means its existing registered shareholders will sell an allocation of their shares, rather than issuing new ones to the public. Companies sometimes opt for a direct listing rather than a traditional Initial Public Offering (IPO) because avoiding bank fees makes it cheaper.
Squarespace (NYSE: SQSP), Coinbase (NASDAQ: COIN), Roblox (NYSE: RBLX), Palantir (NYSE: PLTR) and Asana (NYSE: ASAN) have all opted for direct listings in recent months. With Spotify (NYSE: SPOT) and Slack (NYSE: WORK) paving the way, in prior years.
ZipRecruiter’s S1 filing document can be read here. It states that registered stockholders plan to sell up to 86.6 million Class A shares on May 26.
In this instance, there’s no lock-up period so shareholders are free to sell their stock as and when they please. Advisers to this public listing include Goldman Sachs Group (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM).
Is ZipRecruiter profitable?
In 2010, a team of four launched ZipRecruiter, namely CEO Ian Siegel, Ward Poulos, Will Redd and Joe Edmonds.
Since its inception, over 2.8 million businesses and 110 million job seekers have utilized the ZipRecruiter service. It’s also been rated the number one job seeker app on iOS and Android for the past four years running.
Its first funding round took place in 2014, achieving LA’s biggest Series A funding round in history at $63 million.
Although Covid-19 has impacted the recruitment marketplace across the board, there appears to be an uptick in activity. And ZipRecruiter looks to have persisted rather well, recently achieving profitability in 2020 after a decade of impressive growth.
FY20 achieved revenue of $418.1 million, slightly down year-over-year, as FY19 revenue was $429.6 million. Meanwhile, FY20 enjoyed a net income of $86 million, while FY19 endured a net loss of $6.3 million. Considering 2020 withstood the pandemic, FY20 results were pretty solid.
So far this year, Q1 2021, reached revenue of $125.4 million and net income of $13.4 million. This is an outright improvement year-over-year as Q1 2020, saw revenue of $113.3 million with a net loss of $11.1 million.
Is online recruitment seeing growth?
With lockdowns ending and vaccine rollouts well underway many employers are now under pressure to recruit suitably qualified individuals quickly. And here’s where ZipRecruiter is ready to help. The company offers full employment packages to take the hassle out of the recruitment process. This includes recruiting, hiring, job boards, posting, web application, candidate screening, applicant tracking, and job alerts services.
ZipRecruiter is attempting to redefine online recruitment with efficiency for both employer and candidate in mind. Up until now, the online recruitment process has been paved with challenging hurdles and frustrating inefficiencies. This leaves employers bewildered and job seekers distressed.
The company’s aim is to be more like a matchmaking service than a jobs portal. To do this it curates suitable job opportunities for those looking for work, while simultaneously lining up satisfactory candidates for employers.
Its platform uses unique data led algorithms and artificial intelligence to ensure quality candidates are matched with relevant jobs quickly. The platform is optimised to model and analyze clicks, applications, hiring signals, and numerous interactions to improve outcomes for employers and job seekers alike.
A study in 2016 suggested most jobs are filled through networking rather than online recruitment. This led to the sale of Monster.com to Dutch recruiter Randstad Holding (AMS: RAND). Nevertheless, Randstad has enjoyed a strong start to 2021 with positive momentum across all its geographies, despite lockdowns and macro-economic uncertainty. This bodes well for the industry as a whole.
Julia Pollak, labor economist at ZipRecruiter recently said:
“The recovery is really hitting full steam again, and all of the conditions will be in place for a real, explosive liftoff in the summer when hopefully we’ve reached a higher vaccination threshold,”
Risks to shareholders
The company does face intense competition. Rivals include Monster, Indeed, CareerBuilder, Craigslist, Glassdoor, and LinkedIn while newer entrants such as Google (Alphabet (NASDAQ: GOOG)) or Facebook (NASDAQ: FB) may also pose a risk. Some of these have extensive resources and the ability to price competitively.
Meanwhile, the pandemic continues to cause uncertainty everywhere.
Remote working has taken off in the past year, but it’s vulnerable to cybersecurity incidents. Which is something that could damage the company reputation.
These are a few of the risks shareholders should keep in mind when considering investing in any company.
Investing at IPO can be a blessing or a curse. Many companies have priced low at IPO only to go on and thrive in the following years. But this past year has seen a trend in IPO mania, which has led companies to launch at hugely inflated prices only for their share price to plummet afterwards.
That’s why it’s vital that investors do their homework before jumping into a new stock opportunity.
What will ZipRecruiter shares cost?
We don’t know what the ZipRecruiter share price will be prior to listing. Nevertheless, in its S1 filing the company disclosed that shares of its Class B common stock traded privately at around $6.36 a share during 2020 and at $9 between January and March this year.
Class A common shares will be available to the public and will be identical to Class B shares other than their voting rights. CEO Ian Siegel, some ZipRecruiter executives, and a few private investors will continue to control the company through their ownership of Class B shares. These carry 20 votes each compared to one for the Class A shares.
Many economists suspect a serious bounce back in economic circumstances as the vaccine takes effect. In turn, a boost in recruitment recovery may very well take place in the coming year. If it does then ZipRecruiter could stand to benefit.
It’s the sort of business that thrives on accelerating network activity. So a rise in job listings attracts more job seekers, which in turn brings more employers and the circuit thrives. Being technology led, this enhanced activity feeds into the algorithms, further boosting the effectiveness of the ZipRecruiter platform.
“We believe the market opportunity for ZipRecruiter is enormous…”
The online recruitment market is thought to have a $13 billion opportunity value. Globally it’s expected to achieve a compound annual growth rate (CAGR) of 6.5% between 2019 and 2025, according to Market Insight Reports.
ZipRecruiter was previously valued at around $1.5 billion in 2018 and is expected to list at over $3 billion on May 26.