In 2011, online pet retailer MrChewy.com was just a pup of a startup, though a fast-growing one, with a few million dollars in sales in its first several months.
Fast-forward to this week, and the company, now officially Chewy Inc., is set to begin trading on the New York Stock Exchange Friday in an initial public offering, with an expected valuation in the billions.
For several years, Chewy has been America’s No. 1 online pet supplier, besting even Amazon. In 2017, it was acquired in a multibillion-dollar buyout by PetSmart. Last year, Chewy sales topped $3.5 billion. Though the company has yet to turn a profit, losses continue to narrow as margins have improved. The company is expected to price shares at between $17 and $19, giving it a valuation of more than $7 billion.
The bid to go public is the result, in part, of a settlement between PetSmart and its bond holders. PetSmart remains heavily indebted; spinning off Chewy will bring it much-needed cash. Analysts expect the company to raise at least $700 million.
Regardless of the reasons for the IPO, Chewy’s public offering represents a milestone for South Florida. Chewy now has nearly 10,000 employees. Its brain trust, including current CEO and former Amazon executive Sumit Singh, is headquartered in Dania Beach.
Analysts say the bulk of the IPO’s proceeds will go to PetSmart and BC Capital, a private equity group; the pair remain the company’s two largest shareholders. Matt Kennedy, an analyst for Renaissance Capital, a Connecticut-based research group that tracks IPOs, said in an interview that Chewy’s founding shareholders would likely have cashed out in the 2017 PetSmart sale. Chewy founder and former CEO Ryan Cohen declined to comment on current shareholder positions.
But in an email, he hailed the IPO as a South Florida success story.
“I’m proud that Chewy is based in Florida and I’m especially proud of all the jobs we created,” he said. “I also hope Chewy shines a light on the business opportunities down here.”
Cohen said that he hopes Chewy’s story can help turn around current venture capital trends. As of now, he noted, just 1 percent of total venture capital dollars flow into Florida even though it makes up 6 percent of the U.S. population.
“Our success proved that amazing companies can be built outside of the traditional capital centers,” he said.
Raul Moas, Miami program director at the Knight Foundation, is optimistic that Chewy’s 2017 exit, plus its IPO, will have a “flywheel effect” that catalyzes further investment in Miami-area startups while also beefing up the local talent pool.
“The hope is that folks are able to tap into the equity they’ve been accruing and can be the seeds of new ventures,” Moas said. “That they can help grow other quickly growing companies, so that it creates a virtuous venture cycle that produces, jobs, wealth and experience.”
Anecdotally, Moas said, he has heard experienced Chewy workers are already being poached by other local companies to shore up their talent pools.
“We’re looking for significant exits like this one that, across enough hands, can allow new ventures and new investors to spring forth,” he said.
A spokesperson for Chewy did not respond to a request for comment.
Despite its success, Chewy’s current business performance raises some concern, said Renaissance Capital’s Kennedy. Revenue growth has slowed.
“Companies can be unprofitable — even highly unprofitable — and still be successful,” he said. As the largest online retailer in its space, he said, there is reason to think it should have turned a profit by now.
Still, according to data from Thinkum, a financial analytics company, Chewy’s web traffic continues to climb, as does employment. The company’s website shows more than 100 jobs openings in Broward.
“There’s been some talk of comparing it to Pets.com,” Kennedy said, referring to the infamous 2001 dot-com bubble failure. “The difference being, Chewy has $3.5 billion in sales, and it is the dominant provider for people shopping online.”