Chewy, a subsidiary of privately held PetSmart Inc., is hoping to raise up to $106.4 million when it makes its Wall Street debut. On Monday, the Dania Beach, Florida-based company announced it is kicking off its investor roadshow.
The company also disclosed the terms of its initial public offering (IPO), saying it is going to offer 41.6 million shares of Class A common stock at a price range of between $17 and $19 per apiece. At the midpoint of the price range, Chewy could raise about $648 million if it sells 36 million shares, and $100.8 million if its ends up selling 5.6 million shares.
In an amended registration form filed with the U.S. Securities and Exchange Commission (SEC), the company said it has granted its underwriters the option to purchase an additional 6.24 million shares.
Morgan Stanley, J.P. Morgan and Allen & Company are the joint lead bookrunning managers for the offering. Barclays Capital Inc., RBC Capital Markets, Jefferies, Bank of America Merrill Lynch, RBC Capital Markets, Wells Fargo Securities, and UBS Securities are also acting as joint bookrunning managers.
Shares of the company are expected to start trading on Friday, June 14. The stocks will trade under “CHWY” symbol on the New York Stock Exchange. Chewy plans to use the net proceeds from the offering for working capital and general corporate purposes.
“We intend to use the net proceeds that we will receive from this offering for working capital and general corporate purposes,” the company said. “We cannot specify with certainty the particular uses of the net proceeds that we will receive from this offering. Accordingly, we will have broad discretion in using these proceeds.”
Since Chewy is going public with a dual class structure that allows its owners to retain control even after the offering, its parent firm will own a total of 278.4 million shares of Class B common stock. That represents about 77% of the combined voting power of both classes and about 70% of all shares of common stock.
Chewy supplies pet food and related accessories (including pharmaceuticals and treats) through its e-commerce platform. The company was founded 8 years ago by Ryan Cohen and Michael Day. Since then, Chewy has been growing but it is making losses.
In the 13 weeks to May 5, 2019, Chewy reported gross profit of $253.9 million up from $253.9 million in the 13 weeks to April 29, 2018. Its net loss declined to approximately $30 million in the 13 weeks to May 5, 2019 from about $60 million in the 13 weeks to April 29, 2018.
Chewy posted net sales of approximately $1.11 billion in the 13 weeks ending May 5, 2019 up 45% from net sales of $763.46 million in the 13 weeks ending April 29, 2018. However, its free cash flow deteriorated during that period as the company continued to burn from operating activities.