Squarespace Falls 9.1% in Debut in a Direct Listing First
(Bloomberg) -- Website-hosting service Squarespace Inc. fell 9.1% after opening at $48, the first of seven major direct listings to end its first day of trading below the so-called reference price assigned by the exchange.
The shares, which briefly rose in the initial trading on the New York Stock Exchange, closed at $43.65 Wednesday, giving the company a market value of about $5.9 billion. Fully diluted to include employee stock options and related holdings, that value rises to more than $6.1 billion.
Squarespace said it had an enterprise value of $10 billion in a funding round in March. That valuation would have included employee stock options as well as debt.
The New York Stock Exchange had assigned a reference price of $50 a share for Squarespace’s stock. That figure is merely intended as a guide for investors, as well as to satisfy the mechanics of opening trading.
That group consists of a cadre of technology-oriented firms that chose direct listings over traditional initial public offerings, most recently cryptocurrency exchange Coinbase Global Inc. and online game maker Roblox Corp. this year. Palantir Technologies Inc. and Asana Inc. debuted through direct listings last year, following a trail blazed by Spotify Technology SA and Slack Technologies Inc. before them.
Squarespace didn’t issue new shares to raise capital and its investors were -- as with most direct listings -- able to start selling shares based on demand when trading opens for the most part, without waiting for a lockup period to expire.
‘Any Given Day’
Squarespace’s debut came as U.S. markets declined for the third day in a row.
The company chose a direct listing partly because it was “a little bit independent of what’s happening on any given day in the market,” founder and Chief Executive Officer Anthony Casalena said in an interview.
Casalena said a brief conversation was held earlier on whether the listing should be delayed if market conditions were unfavorable.
“We all decided that we’d be better to be on the other side and to let it trade than to try and hold it when our fundamentals are the same and just wait for a different day,” he said.
Squarespace competes against publicly traded rivals Wix.com Ltd. and GoDaddy Inc., among others. The New York-based company is backed by investors including General Atlantic, Index Ventures and Accel.
While investment banks don’t underwrite direct listings as they do IPOs, they advise the company on the listing. Squarespace is working with with banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co., according to its filings with the U.S. Securities and Exchange Commission. The company’s shares are trading under the symbol SQSP.
Squarespace had 3.7 million unique subscriptions as of Dec. 31 and is expanding beyond web hosting to e-commerce, according to its filing. It had a net income of about $31 million on revenue of $621 million last year, compared with $58 million on revenue of $485 million in 2019, according to its filing.
Its e-commerce business had 2020 revenue of $143 million, a 78% increase over the previous year, according to the filing. Its growth plans include expanding it customer base -- especially internationally -- and deepening its commerce offerings.
The company acquired restaurant-services provider Tock for more than $400 million in March. Squarespace paid a mix of cash and stock for the Chicago-based company, which provides technology for online reservations, takeout and other services. That followed 2019 deals for Unfold Creative LLC and Acuity Scheduling Inc.
Squarespace will pursue strategic acquisitions to accelerate key platform, product and marketing initiatives, it said in its filings.
Casalena continues to control the company through his 76% ownership of the company’s Class B shares, which carry 10 votes each compared with one each for the Class A shares that will be listed, according to the filings.
Squarespace board member Andrew Braccia, an Accel partner, said, “It’s another indicator that great technology companies don’t have to be built in Silicon Valley.”
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