IPOs Are Back — The Hut Group and Snowflake Go Public

By Luigi Wewege Thursday, September 17, 2020

Like other market segments, the initial public offering (IPO) schedule for 2020 has also suffered from the pandemic. Management teams behind companies that went through the IPO process thought it’s better to wait until the dust settles before conducting the IPO.

After the Hut Group and Snowflake successfully completed their IPOs this week and started to trade publicly, the sentiment around the markets is that others may be encouraged to launch similar deals.

The Biggest UK IPO in Seven Years

Shares of The Hut Group surged over 30% in its first day of public trading on Wednesday. The retail company, which works with companies such as Lookfantastic and ESPA, secured $2.42 billion in a float that valued the retailer at nearly $7 billion. The Hut Group sold 376 million shares, at around $0.64 a share.

This marked the largest initial public offering in the London stock market since Royal Mail’s IPO in 2013. The Hut Group’s IPO secured $1.18 billion for the company, while its shareholders, led by founder Matthew Moulding, will split the gross amount of $1.23 billion.

The Hut Group had an outstanding market debut, particularly for a year that has been terrible for IPOs as the COVID-19 pandemic sent IPO volumes in Europe down to their lowest mark in eight years. However, some investors have voiced their concerns regarding the structure of the deal.

Matthew Moulding will keep his position as the chairman and the CEO of the company. Since the group’s shares will be issued in different “classes,” Moulding will have greater voting powers than the majority of other companies listed in London.

This also means that the group will not be considered a premium listing, making it ineligible for the FTSE 100 even though it’s large enough for the index. The London Stock Exchange standard listing demanded high-level administration and was on par with other European exchanges, said a person familiar with the deal.

BlackRock, Henderson Global Investors, as well as funds controlled by Merian and the Qatar Investment Authority, purchased $728 million of the shares at the IPO.

“There wasn’t too much concern about this during the bookbuild — investors understand that the founder is a key part of the story,” said a source close to the deal to Reuters.

The source added that The Hut Group’s strong market debut could encourage other companies to launch deals.

“We expect it to be a busy fourth quarter,” he added.

JP Morgan, Citi, Barclays, and Goldman Sachs served as international coordinators, while HSBC, Jefferies, and Numis were joint book-runners.

The Largest US Listing This Year

In a similar fashion, Snowflake announced on Tuesday that it managed to secure $3.36 billion in its initial public offering after it was valued above the target range in the largest U.S. listing in 2020.

The software company’s stock was priced at $120 per share at the IPO, valuing it more than $30 billion. On Monday, Snowflake said it was looking to sell 28 million shares at $100-$110 per share after its estimated pricing was lifted from a price range of $75 to $85 per share last week.

Snowflake’s offering overshadowed Royalty Pharma’s IPO, the biggest one so far this year, emphasizing the recent rebound in the new listings in the US after the coronavirus pandemic delayed several IPOs.

The company was confident to file for an IPO earlier this year, not long after its last funding in February, where the company was valued at more than $12 billion. Venture capital firm Sequoia held 8.4% of the company’s stock before the IPO.

The revenue of the cloud-based data-warehousing startup soared 173.9% to $264.7 million for the full year through January 31, but its net loss almost doubled to $348.54 million.

Snowflake’s stock will be listed on the New York Stock Exchange on Wednesday under the ticker “SNOW,” while the IPO is scheduled to end on September 18.

Goldman Sachs, Morgan Stanley, J.P. Morgan, Allen & Co, and Citigroup are the main underwriters for the IPO.

Summary

The Hut Group’s shares jumped 30% in its market debut yesterday after its IPO valued the firm at nearly $7 billion in the largest London stock market debut since 2013. Similarly, the California-based software company Snowflake raised $3.36 billion in its IPO, valuing it over $30 billion. Snowflake’s IPO outshined Royalty Pharma’s IPO, which was the largest one this year.

About the Author


Headshot of author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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