Investor Appetite For Chewy IPO Shows eCommerce Has Bite

Why WeWork’s IPO Strategy Could Deter Investors

This week marked the debut of a few surging initial public offerings (IPOs), focused on commerce done by bits and bytes.

Turns out the platform is a platform for heady stock market gains, and for cash to fill retailers’ coffers.

As has been widely reported, Fiverr came public Thursday (June 13), and its platform model, likened to that of Amazon, which links gig workers and employers offering gig work, helped shares surge by more than 90 percent.

Then came Friday, where an IPO of a different sort showed bark and bite. Shares of Chewy at this writing were up about 80 percent, to $39. Consider the fact that the shares, coming into trading, were priced at $22. That $22 tally was itself higher than the $19 to $21 range that had been set this week.

Chewy, of course, is PetSmart’s online retailing arm. PetSmart still is a majority owner of the company, which upon Friday’s trading is now valued at about $15 billion and where the sale netted $1 billion.

Like some of its high-tech peers, Chewy does have red ink at the operating line, at a loss of $268 million in 2018. Sales are growing at an impressive rate, up 68 percent year on year to $3.5 billion.

As had been noted in The Wall Street Journal, the IPO market has offered a cash conduit to retailers selling at least partial ownership of eCommerce operations. The financial publication said half of the proceeds are to be used to pay down debt.

The news gave lift to PetSmart bonds to roughly 95 cents on the dollar, and where that ratio had been 83 cents on news of the IPO came in April. PetSmart may be seeing declines in its brick-and-mortar business, but it is the clickable commerce arm that is seeing torque. The retailer bought Chewy in 2018, and the total purchase price was $3.35 billion (of that tally, about $2 billion was debt). With the $15 billion valuation implied by Friday’s price action, the move has paid off handsomely, speaking to the ways omnichannel strategies can yield results positive for the ongoing business and some real cash in hand.

For brick-and-mortar companies, there’s literal gold in eCommerce, and keeping skin in the eCommerce game (by maintaining  ownership) means that even more positive results may be in the offing.


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