PetSmart-controlled Chewy surged in its first day of trading after raising $1.02 billion in an initial public offering, as investors bet that pet owners will do more of their shopping online for everything from cat food to doggy sweaters.

Chewy’s shares rose as much as 88% in the first hour of trading Friday from the $22 offer price. The shares closed up 59% to $34.99, giving the company a market value of about $13.95 billion.

PetSmart acquired Chewy in 2017, paying about $3 billion for the company. PetSmart last year pegged the value of Chewy at $4.45 billion in private documents shared with investors, according to people with knowledge of those documents.

On Thursday, Chewy sold 46.5 million shares above its $19 to $21 target range, after earlier marketing only 41.6 million shares for $17 to $19 each. The offering included 5.6 million shares sold by Dania Beach, Florida-based Chewy and 40.9 million sold by a wholly owned subsidiary of PetSmart, according to a statement.

The offering was the sixth-biggest out of 78 in the U.S. this year, according to data compiled by Bloomberg. It’s one of only 10 IPOs for online product retailers globally to exceed $1 billion, a group that includes the 2014 Alibaba Group Holding Ltd. $25 billion listing, the largest-ever.

$72 Billion on Pets

Americans spent more than $72 billion on their pets last year, with Chewy’s 31% of U.S. online sales surpassed only by Inc.’s 55% share, according to the American Pet Products Association. The Chewy site, which started in 2011, logged sales of $3.53 billion for the year ended Feb. 3, up from $2.1 billion from the previous fiscal year, according to the company’s prospectus.


“Pet parents” continue to spend even in times of economic uncertainty. During the 2008 to 2010 recession, overall consumer spending in the U.S. declined, while pet spending increased by 12%, Chewy has said, citing APPA.

Chewy plans to continue growing by expanding its private-label products and health services including prescription drugs, Chief Executive Officer Sumit Singh said in an interview.

“Our active customers spend more and more the longer they stay with us,” Singh said. “We have a lot more to do out there, a lot more customers to add.”

The offering follows a heated dispute between PetSmart and its creditors over the transfer of Chewy assets ahead of the IPO.

Loan Dispute

PetSmart and its private equity owners, a group led by BC Partners, moved a portion of the Chewy unit to an unrestricted subsidiary and another to the parent company, both out of creditors’ reach. Lenders sued, arguing that PetSmart was insolvent at the time of the transfer and that the move was fraudulent.

PetSmart resolved the dispute by amending its loan agreement, promising to give lenders a portion of the proceeds from any eventual sale of the online business, according to people with knowledge of the situation. The exact amount of PetSmart’s proceeds from the IPO that will go to pay down debt has yet to be determined.


Before Chewy’s offering was expanded, current investors were to have retained a 90% stake in the company as well as 99% of the voting rights as a result of the dual-class share, according to its filings with the U.S. Securities and Exchange Commission. PetSmart was to have 70% of the total shares and 77% of the voting power, the filings show.

Debt Relief

Chewy’s IPO should give some financial relief to PetSmart, which is saddled with more than $8 billion of debt due over the next six years. After Chewy raised the price range for its IPO on Wednesday, PetSmart’s bonds rallied to the highest level in two years. Its bonds due in 2023 and 2025 were among the top gainers in the U.S. high-yield market on Friday, according to Trace bond trading data.

“A strong public-market showing by Chewy will be a positive due to the increased asset coverage it implies and the possibility that some of those assets will be monetized and used to pay down debt in the future,” said Ben Briggs, a high yield and distressed credit analyst with INTL FCStone.

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

The offering was led by Morgan Stanley, JPMorgan Chase & Co. and Allen & Co. The shares are trading on the New York Stock Exchange under the symbol CHWY.