Petsmart's Chewy IPO soars 59% in stock market debut

Chewy raises $1 billion in IPO and stock soars in trading debut

Ryan Cohen, co-founder of the newly-public online pet-product retailer Chewy, said compassion goes a long way in the world of retail, and that's what gives Chewy a leg up on Amazon (AMZN) and other e-commerce sites.

Chewy's shares rose as much as 88% in the first hour of trading Friday from the $22 offer price.

Americans spent more than $72 billion on their pets a year ago, with Chewy's 31% of USA online sales surpassed only by Inc.'s 55% share, according to the American Pet Products Association. The initial public offering of more than 5.6 million shares of Class A common stock was priced between $19 and $21 per share.

At $22 per share, PetSmart will receive nearly $900 million from the sale of its stock.

Shares of Chewy are expected to start trading on the New York Stock Exchange on Friday under the symbol "CHWY".

The online pet food retailer's CEO sees a brilliant future for the company.

The stock rise now puts the value of the 8-year-old company at more than $14 billion.

Chewy's sales have rocketed from $26 million to $3.5 billion between 2012 and 2018.

"And then you have companies like Zoom, and then now like Chewy, who are not yet profitable but have a very clear road to profitability", he said, adding that these companies have benefited from making clear to investors that any available funds have been reinvested into customer acquisition.

This relatively small amount of fundraising, however, has some market observers thinking Chewy isn't in the IPO game for money.

Despite this growth, Chewy has operated at a net loss of -$267.89 million in FY2018 and -$338.057 million in FY2017. Spending on pet products and services is projected to continue its historically consistent growth at a 4.2-percent CAGR from 2017 to 2022, the company said, citing Packaged Facts.

"The objective of this IPO is not to provide capital for Chewy, it's an opportunity for PetSmart to cash out on its investment", writes David Trainer, CEO of independent equity research firm, New Constructs, and a Forbes columnist.

Morgan Stanley, JPMorgan, Allen & Co and Bank of America Merrill Lynch are leading the 12-member underwriting team.



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