Squarespace Opens Below Reference Price and Falls in Debut

(Bloomberg) -- Website-hosting service Squarespace Inc. fell as much as 10% in its trading debut after opening at $48 a share in its direct listing on the New York Stock Exchange.

The shares, which briefly rose in the initial trading, were selling for $43.53 at 3:20 p.m. 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 had an enterprise value of $10 billion in a funding round in March. That valuation would have been fully diluted to include employee stock options as well as debt.

The New York Stock Exchange had assigned a so-called 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. Still, Squarespace is the first of seven major direct listings in which the shares opened below the reference price.

The company joins a cadre of technology-oriented firms that have chosen 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.

For More: ‘Very Silly’ Reference Prices Prove to Be Surprisingly Accurate

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 comes as U.S. markets are declining for the third day in a row.

“One of the big reasons we did the direct listing is because, in a way, it’s a little bit independent of what’s happening on any given day in the market,” founder and Chief Executive Officer Anthony Casalena said in a Bloomberg TV interview.

“If people want to sell today, they can sell, if they want to buy today, they can buy,” he said. “But the company is not going to suffer any unneeded dilution as a result of coming out on this day.”

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.

E-Commerce Push

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.

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