It’s not everyday that the New York Stock Exchange (NYSE) allows dogs on the trading floor. But Friday morning, a pack of dogs rang the bell for the initial public offering of Chewy (CHWY), the online pet supply shop that has became the latest addition to the 2019 IPO frenzy led by tech unicorns like Uber and Pinterest.
Chewy, an eight-year-old company acquired by PetSmart in 2017, debuted on the NYSE at $22 per share, which valued the company at $8.8 billion. From the offering, Chewy raised just over $1 billion in fresh funding.
This relatively small amount of fundraising, however, has some market observers thinking Chewy isn’t in the IPO game for money.
“The purpose of this IPO is not to provide capital for Chewy, it’s an opportunity for PetSmart to cash out on its investment,” writes David Trainer, CEO of independent equity research firm, New Constructs, and a Forbes columnist. “The brick-and-mortar retailer is at risk of bankruptcy due to its high debt load, so it needs this cash infusion to survive.”
Founded in 2011, Chewy labels itself as “the most trusted and convenient online destination for pet parents everywhere.”
The e-tailer prides itself on its customer-centric model. The company offers 24/7 customer service backed by a large and sophisticatedly trained network of customer service reps. When a customer’s pet dies, the company sends out a sympathy card. It even hires about 100 artists who draw portraits of customers’ pets as occasional surprise presents.
This approach partly explained Chewy’s rapid scaling despite intense competition in the e-commerce space. Between 2011 and 2018, Chewy’s sales grew from $2 million to $3.5 billion, an over 400 percent annual growth rate. It currently owns 55 percent of the online pet food market and a third of the online pet supply market, according to Retail Dive.
But such heavy spending on customer service and marketing has also cut into Chewy’s bottom line. According to its IPO filing, Chewy lost $268 million last year on $3.5 billion in sales.