Website building platform place (NYSE: SQSP) went public this week with a direct listing, one of the few alternative avenues to the public markets that go beyond a traditional IPO that has grown in popularity in recent years.
Instead of an offer price for a structured deal, companies that are directly listed on the stock exchange provide a “reference price”, which is usually related to the most recent prices in private markets. In the case of Squarespace, the company set a reference price of $ 50.
Investor interest was lukewarm, however, as the stock immediately traded below this threshold on the first day.
Here’s what investors need to know about the business.
Set up a digital shop
Squarespace has been around for nearly two decades, helping people and businesses build websites using a range of creative tools that integrate ecommerce and marketing functions. Prominent rivals are WordPress, Wix (NASDAQ: WIX), Shopify (NYSE: SHOP) and place (NYSE: SQ) Weebly among many others.
In terms of business, Squarespace had revenue of $ 621.1 million in 2020, up 28% from $ 484.8 million in 2019. Subscriptions accounted for approximately 94% of 2020 revenue. The company ended the year with 3.7 million individual subscriptions. Squarespace is helping businesses build e-commerce operations, and the gross product value (GMV) on the platform rose 91% over the past year to around $ 4 billion.
This resulted in $ 143 million in ecommerce sales for Squarespace in 2020. Total bookings in 2020 were $ 664.7 million, and Squarespace reported average revenue per subscription of $ 186.
Squarespace is primarily aimed at small and medium-sized businesses (SMBs), and the company estimates that there are 800 million such organizations worldwide. According to Squarespace, the total addressable market (TAM) is over $ 150 billion. The COVID-19 pandemic also accelerated adoption among SMEs who had to move to online sales and build digital presences to drive future demand growth.
Expansion into new markets
More recently, Squarespace acquired Tock, a unified platform that the hospitality industry uses to facilitate online reservations and manage other events. The total price was $ 415 million, and according to Squarespace, the deal will help expand the suite of products and better target new markets like the restaurant industry.
Like many modern tech companies, Squarespace uses a multi-class stock structure to ensure oversized voting rights for its founder and other insiders. The company’s capital structure includes Class A Shares, which receive one vote per share, and Class B Shares, which receive ten votes per share. (There were Class C Shares that did not receive any votes, but that Class has been eliminated and there are no remaining Class C Shares outstanding).
CEO Anthony Casalena holds over 49 million Class B Shares, the majority of the outstanding Class B Shares, giving him a total of 68% voting power. Accordingly, the Squarespace founder can single-handedly control all corporate governance matters, including shareholder proposals, board composition, and his own compensation. Public investors will not have a say in the administration of Squarespace.
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