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

Chewy shares skyrocket in stock market debut

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"Chewy has a tremendous following at the consumer level. these guys know how many dogs people have, what their ages are and if you lose a dog they send a bouquet of flowers!" The first trade of the money-losing company was at $36 a share. It was bought in 2017 by PetSmart for almost $3.4 billion. PetSmart a year ago pegged the value of Chewy at $4.45 billion in private documents shared with investors, according to people with knowledge of those documents.

The company had set a price range of $19 to $21 per share, which was raised earlier this week from $17 to $19 per share.

By 11:30 a.m. Friday, share prices had almost doubled to more than $41.

The offering was the sixth-biggest out of 78 in the US this year, according to data compiled by Bloomberg.

Roughly 68 percent of USA households have pets and they paid $72.6 billion to care for them in 2018 - up from $43.2 billion in 2008, according to data from The American Pet Products Association. The company lost $267.9 million past year on revenue of $3.5 billion.

"Our customers realize that we truly care", Cohen said.

The offering follows a heated dispute between PetSmart and its creditors over the transfer of Chewy assets ahead of the IPO. And just two years later, PetSmart, which is owned by a group of private equity investors led by BC Partners, spun Chewy off into a public company on Friday. Lenders sued, arguing that PetSmart was insolvent at the time of the transfer and that the move was fraudulent. PetSmart will receive about $900 million from the sale. The exact amount of PetSmart's proceeds from the IPO that will go to pay down debt has yet to be determined.

Chewy is also considering expanding overseas, as well as expanding in-house brands and pet pharmacy offerings.

Last July, Chewy launched its pharmacy business, pushing into the lucrative prescription drugs market that has always been the turf of veterinarians and their partners. Its bonds due in 2023 and 2025 were among the top gainers in the USA high-yield market on Friday, according to Trace bond trading data.

"It's a strong indicator that the company will continue to grow and hire more employees", said Matt Kennedy, senior initial public offering market strategist at Connecticut-based Renaissance Capital LLC, which monitors IPOs.

After the IPO, Chewy expects to obtain a new revolving credit facility with covenants, including requirements that it maintain certain financial ratios.

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