NYSE
Squarespace kicked off life as a public company Wednesday, with its shares dropping below its $50 reference price.
Squarespace’s (ticker: SQSP) stock opened at $48, hit a high of $50.02, and closed at $43.31, off 13.4%.
The muted performance of the direct listing comes after the New York Stock Exchange assigned a $50 reference price to Squarespace on Tuesday evening. At $43.31, Squarespace ended Wednesday with a near $5.9 billion market capitalization. This is lower than the $10 billion valuation the company snagged with its last funding round in March.
“We are incredibly happy and honored to start a new chapter in the life of Squarespace,” Marcela Martin, Squarespace’s chief financial officer, told Barron’s. before the stock opened.
Founded in 2003, Squarespace is a website building and payments company. Its platform is used by millions of customers in over 180 companies, its prospectus said. Last week, the company said it expected revenue of $186 million to $189 million for its fiscal second quarter and revenue of $764 million to $776 million for its full fiscal year 2021. In web creation, Squarespace competes against Wix.com (WIX) and Square’s (SQ) Weebly along with Shopify (SHOP), which lets businesses set up online shops.
Squarespace looked at all of its options, including a traditional initial public offering and merging with a special purpose acquisition company, or SPAC, when it was considering going public, Martin said. It chose a direct listing because it wanted to give its employees and shareholders access to liquidity. Squarespace itself is not selling any of the 40.4 million shares that have been registered with the IPO. Instead, its stockholders are offering those shares. Squarespace will not receive any proceeds from the direct listings.
“The company has been profitable since 2016,” Martin said. “We didn’t think we needed the cash and that’s why we decided to go for a direct listing.”
A direct listing will also allow Squarespace to expand the talent pool it can reach, she added. “This will allow us to access the capital markets more easily.”
The CFO said she was “very excited” about the company’s $415 million acquisition of Tock, which provides online reservations, table management, carryout operations, and events for more than 7,000 hospitality operators. Squarespace will continue to look at acquisition opportunities, she said.
While Squarespace is profitable, the company reported a $10.1 million loss for the quarter ended March 31, 2020. The first quarter is impacted by seasonality, Martin said. “The seasonality of marketing is one that impacts the most,” she said.
Squarespace is the third company to go public via a direct listing this year. Coinbase Global (COIN), the cryptocurrency exchange, used the technique to list its shares in April. This followed Roblox (RBLX), the gaming platform, which made its debut on the NYSE in March.
ZipRecruiter, the online employment marketplace, is scheduled to go public next week using a direct listing.
Write to luisa.beltran@barrons.com
