Thursday, 14 November, 2019

Online pet-product retailer Chewy's stock soars on debut

PetSmart’s Chewy prices its IPO at $22 a share, higher than its target Chewy shares skyrocket in stock market debut
Ginger Lawrence | 16 June, 2019, 19:38

Shares of Chewy, which was bought by retailer PetSmart in 2017 for almost $3.4 billion, soared almost 80% to about $39 in early trading Friday. The shares closed up 59% to $34.99, giving the company a market value of about $13.95 billion.

PetSmart purchased Chewy for an eye-popping $3.35 billion of every 2017. PetSmart past year pegged the value of Chewy at $4.45 billion in private documents shared with investors, according to people with knowledge of those documents.

During its IPO, Chewy Inc. had sold about 46.5 million shares, about 10 percent up from originally planned 41.6 million shares.

The offering was the sixth-biggest out of 78 in the US this year, according to data compiled by Bloomberg. The IPO valued the company at $8.8 billion, which is roughly double the $4.45 billion valuation that PetSmart reportedly set previous year in private communications with investors.

Chewy generated sales of $3.5 billion in 2018 - up 67 percent from the prior year - as pet owners flocked to the company's offerings of pet food and toys.

Cohen stepped down as Chewy's CEO in 2018.

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Chewy plans to continue growing by expanding its private-label products and health services including prescription drugs, Chief Executive Officer Sumit Singh said in an interview.

"Our customers realize that we truly care", Cohen said. "We have a lot more to do out there, a lot more customers to add". Even after the IPO, PetSmart is still Chewy's largest shareholder. Lenders sued, arguing that PetSmart was insolvent at the time of the transfer and that the move was fraudulent. And while pet food buyers count for just 15% of all online buyers, they generate one-third of all e-commerce revenue, according to Rakuten Intelligence. The exact amount of PetSmart's proceeds from the IPO that will go to pay down debt has yet to be determined. The company partners with 1,600 brands in the pet industry and also offers its own private brands.

PetSmart and BC Partners will retain control of Chewy through Class B shares, which carry more voting power. The IPO was initially targeted in the $19-21 range but it was bumped up and priced yesterday at $22.

What sets Chewy (CHWY) apart from its competitors?

Morgan Stanley, JPMorgan, Allen & Co and Bank of America Merrill Lynch led the 12-member underwriting team. Besides, at its first day in NYSE, on Friday (June 14th), shares of Chewy Inc. had rocketed by 59.05 percent to wrap the day up just a notch shy of $35 per share, after rising as much as 86 percent to $41 per share during morning U.S. trading hours.