Online pet supplies retailer Chewy (NYSE: CHWY) had a blockbuster Wall Street debut Friday as the shares surged about 80% in the early trading hours to above $40. Later, the stock retreated modestly and stabilized. The company commenced trading on the New York Stock Exchange under the symbol CHWY.
Chewy became a popular one-stop destination for pet products after it was acquired by PetSmart two years ago for $3.4 billion. Since the buyout, Chewy expanded rapidly due to the mass shift to online shopping in key markets. Chewy’s growth brought a great deal of relief to PetSmart, which was witnessing a slowdown in store sales. Soon, Chewy became the pet owners’ favorite for its exemplary customer service that included faster delivery, compared to competitors, and round-the-clock access.
Chewy became a popular one-stop destination for pet products after it was acquired by PetSmart two years ago
Chewy opened at $36 Friday, which represents a market cap of nearly $15 billion. The IPO was priced at $22 per share, which is above the expected range. The number of shares offered was 5 million more than what was expected and the company raised $1 billion from the sale.
Currently, PetSmart owns a three-fourths stake in Chewy, which was founded by Florida-based entrepreneurs Ryan Cohen and Michael Day in 2011 under the name Mr. Chewy.
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The overwhelming response to the IPO can be attributed to the phenomenal growth the company has achieved, with sales surging to $3.5 billion last year, thanks to the strong customer base. According to estimates, the company is yet to tap the majority of the American pet supplies market.
Meanwhile, investors might find Chewy’s recent bottom-line performance discouraging. The company remained in a loss last year, though it narrowed by about $70 million. High costs, especially those related to shipping, remains a drag on margins.