Rescuing Investors from Ignorance, SEC Suspends Trading in ZOOM Technologies

Zoom Video Communications (NASDAQ: ZM) is a COVID-19 phenomenon. Rocketing roughly 30% in price over the past month, and more than doubling over the past year, Zoom Video stock has been one of the market’s top performers of late.

© Provided by The Motley Fool Rescuing Investors from Ignorance, SEC Suspends Trading in ZOOM Technologies

It’s not a patch, though, on the performance of similarly named ZOOM Technologies (OTC: ZOOM), a company that previously distributed wireless communication products, but now “does not have significant operations,” according to S&P Capital IQ.

A tiny Pink Sheeted stock with a $31 million market cap, ZOOM Technologies stock has more than doubled in the past month … and is up 3,900% in the past year!

And that scares the SEC to death.  

© Getty Images Words Common Mistakes written on a notepad

This morning, the SEC temporarily suspended trading in ZOOM Technologies pursuant to Section 12(k) of the Securities Exchange Act of 1934, citing “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.”

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More pertinent than its concerns about ZOOM Technologies’ financial health, though, are the SEC’s “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.”

Simply put, the SEC is worried that investors who move to quickly to look up a stock quote on Zoom Video (currently trading around $140), may accidentally find a quote for ZOOM Technologies instead (currently trading around $10.40) — and mistakenly believe they’ve stumbled upon the deal of a lifetime. To prevent shareholders falling into this error and buying the wrong stock, the SEC is preventing them from buying shares of ZOOM Technologies at all.

Good looking out, SEC.

Rich Smith 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.

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