Due to the rising concerns over its security protocols and other privacy issues, share prices of Zoom Video Communications dropped by close to 8 percent on Monday. The dip managed to put a huge dent on the massive gains made by the video conferencing platform operator in the previous months.
Zoom's share prices had surged to new record highs last month as more people started to use its platform to work from home. The company reported millions of new users worldwide as it app became the go-to platform for business meetings and school sessions amid the global stay-at-home orders and lockdowns imposed by governments to control the spread of the coronavirus pandemic.
The gains were unfortunately short-lived as reports of possible security concerns started to pop up. The potential data privacy issues had spooked some investors, with some choosing to pull out their investments. The subsequent pullouts resulted in nearly a third of the company's market value during its peak last month, completely being wiped out.
On Monday, Zoom's share prices dropped by 7.9 percent and closed at $118.05 per share. It was the worst-performing company on the NASDAQ during the trading day. Several investment banks, including Credit Suisse, had downgraded the stock's rating.
In a note published by the bank's analysts, it was mentioned that Zoom's prospects continue to be uncertain, given that its increased user base is mostly free users. In March, Zoom reported that it had increased its user base from 10 million to more than 200 million.
Following the news of possible security flaws in Zoom's platform, several industrial users have begun to look for alternative solutions. Several school districts in the US have banned the use of the app for online learning, with most stating that they are simply protecting the privacy of their students.
Last week, Elon Musk announced that he is banning the use of the online video platform by employees at his aerospace company SpaceX. He explained that they had found significant privacy and security concerns but did not elaborate further on what they had discovered.
Apart from the security concerns, Zoom is also facing stiff competition from companies with much deeper pockets. Microsoft, which is competing with Zoom through its Teams platform, took advantage of the situation and has begun marketing the strengths of its product.
On Monday, Microsoft stated that its platform utilizes encrypted data to combat cybersecurity threats. It also boasted that unlike other platforms, its Teams app does not use or collect user data for advertisements.
