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The IPO raises funds to help manage the debt
load of parent company PetSmart, and indicates investor demand
for a loss-making but fast-growing e-commerce company to tap
into the roughly $70 billion U.S. pet industry market.
Chewy's sales have rocketed from $26 million to $3.5 billion
between 2012 and 2018. Its 2018 net loss narrowed to $267.9
million from $338.1 million in 2017.
Some 46.5 million Chewy shares were sold in the IPO, up from the
anticipated 41.6 million as PetSmart sold more shares than
originally planned.
At $22 per share, PetSmart will receive almost $900 million from
the sale of its stock. Chewy raised $123.2 million, which the
company has said will be used for working capital and other
expenses.
Chewy had set a price range of $19 to $21 per share, which was
raised earlier this week from $17 to $19 per share.
Chewy pitched its stock to investors as a way to buy into the
trend of "pet humanization" by owners who are increasingly
treating pets as a part of their families, as well as buying
into an industry which has historically held up well in economic
downturns.
Private equity firm BC Partners Inc acquired PetSmart for $8.7
billion in 2014, as it sought to capitalize on consumers
lavishing their pets with expensive treats and gear.
However, the company quickly faced strong headwinds as many
customers snubbed its stores for the convenience of online
shopping.
In response, PetSmart acquired Chewy in 2017, adding $2 billion
to PetSmart's debt load to do the deal. The IPO values Chewy at
almost three times the $3.35 billion PetSmart paid for the
company.
Chewy competes with Amazon.com Inc and Blue Buffalo Pet
Products, which was acquired by General Mills Inc last year.
Chewy is trying to foster customer loyalty, an effort which has
included sending bereavement cards to shoppers who have recently
lost a pet.
Chewy co-founder Ryan Cohen sees plenty of growth left for the
company and long gone are the company's early days when it
struggled to attract capital.
"There's still lots of penetration and growth to be had just
within the U.S. market, there's continuing to expand
internationally," Cohen, who stepped down as CEO of Chewy in
2018, said in an interview earlier this week.
After the IPO, PetSmart and BC Partners will retain control of
Chewy through their class B shares, which carry considerably
more voting power than the class A shares investors in the IPO
are buying.
The IPO comes after PetSmart settled a dispute with lenders in
April over the transfer of a portion of its stake in Chewy to
certain PetSmart subsidiaries.
Shares of Chewy are expected to start trading on the New York
Stock Exchange on Friday under the symbol "CHWY".
Morgan Stanley, JPMorgan, Allen & Co and Bank of America Merrill
Lynch are leading the 12-member underwriting team.
(Reporting by Joshua Franklin in New York; Editing by Lisa
Shumaker)
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