Barking up the right tree: Petco shares surge in Nasdaq return

(Reuters) - Shares of Petco Health and Wellness Co Inc jumped as much as 72.7% in their market debut on Thursday, giving the U.S. pet supplies retailer a market capitalization of $6.81 billion.

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The company’s shares opened at $26, 44.4% above its initial public offering (IPO) price of $18 per share.

Petco offered 48 million shares and raised $864 million in its IPO as it cashed in on a pandemic-driven surge in pet adoptions and spending on pet care.

The debut comes at a time that could be the biggest week for new listings in over five years, as companies rush to take advantage of the strongest market for IPOs in nearly two decades, after a lull last year.

Petco, among the largest pet retailers in the U.S. with nearly 1,470 brick-and-mortar pet care centers, was bought by CVC Capital Partners and Canada Pension Plan Investment Board for about $4.6 billion in 2016, a decade after its previous owners took the company private.

“We have a growth business and the time is right for the private equity folks to realize on their investment,” Petco Chief Executive Officer Ron Coughlin told Reuters.

The proceeds from the offering will be used to cut the company’s debt in half and allow it to focus more on expansion, Coughlin added.

With lower debt interest payments, Coughlin said he expects Petco to turn a profit in its first quarter. The company posted a net attributable loss of $20.3 million on net sales of about $3.58 billion in the 39 weeks ended Oct. 31.

Petco’s shares were last up 66.1% at $29.88. Rival online pet products retailer Chewy Inc has seen its stock more than double in the last six months.

Goldman Sachs and BofA Securities were the lead underwriters for the Petco offering.

Reporting by Sohini Podder and Uday Sampath in Bengaluru; Editing by Shounak Dasgupta