Chewy, the online pet products retailer, is scheduled to begin trading Friday on the New York Stock Exchange as the latest in a long string of money-losing technology stock-market launches this year.
The company, controlled by the private equity-owned chain PetSmart, priced its initial public offering Thursday at $22 a share. It sold 46.5 million shares, valuing the company around $8.8 billion. The IPO will raise roughly $1 billion for Chewy.
The stock is expected to trade under the ticker CHWY, and an early indication showed the stock was set to open between $35 and $36 a share, Bloomberg reported.
Chewy’s $22 pricing was above the company’s target, a source told Reuters on Thursday. The company had initially set a price range of $19 to $21, upped from a range of $17 to $19.
While the eight-year-old Chewy’s net sales have soared in recent years, its losses have widened. This isn’t an uncommon feature for a young company chasing growth, but it’s indicative of investors’ strong demand for companies with uncertain paths to profitability, like the Ubers and Lyfts of the world.
Chewy’s net sales per active customer grew to $334 from $223 between 2012 and 2018, while its net sales rose to $3.5 billion from from $26 million over the same period. Meanwhile, it recorded losses of nearly $268 million last year — down from $338 million lost during the prior period, although it marked a jump from 2016’s $107 million loss.
The Dania Beach, Florida-based company is betting on what it calls “pet humanization” trends for the future of its business. Around 90% of dog owners and 86% of cat owners consider their pets to be part of their family, according to 2018 data from the market research firm Packaged Facts.
“Pet parents increasingly view pets as part of the family and are willing to spend increasingly larger dollar amounts on higher-quality goods and services for those family members,” the company said earlier this year in a filing with the Securities and Exchange Commission.
It’s also betting on the sustained growth in the number of household pets. The American Pet Products Association, an industry group, estimates almost 85 million US households had at least one pet, up from nearly 73 million in 2010.
The company faces stiff competition from Amazon, which also sells pet products. Chewy’s chief executive officer and former chief operating officer, Sumit Singh, was a former Amazon executive.
Larry Cheng, Chewy’s first institutional investor and former board member, said he’s not concerned about that rivalry.
“What we saw was the rise of the premium pet food market, and at the early days, the premium pet food manufacturers didn’t want to work with Amazon,” he told CNBC’s “Squawk Box” on Friday.
“What they saw in Chewy was a company that was totally committed to the pet category and the pet customer, so they understood the product,” he said. “There was a merchandising advantage at the outset for Chewy in this category.”
Chewy intends to use the proceeds from its offering for “working capital and general corporate purposes.”
Morgan Stanley, JP Morgan, and Allen & Company are together acting as joint lead underwriters for the offering. A host of firms like Bank of America Merrill Lynch and Jefferies are acting as joint bookrunners.
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