Mooshi
So, I appear at one of the streaming financial TV shows that I regularly show up on. Let's say this was Thursday. The anchor, who I have been friendly with for many years, speaks just before getting to me about how she has dogs and relies on Chewy ( CHWY) to keep her furry pals well supplied. I think to myself, "Hmm, maybe I should be doing something like that."
Roughly fourteen hours later, I have written and submitted "Market Recon" to the editors at Real Money. I have outlined a piece for "Stocks Under $10," and I have placed a "beneath the market" bid for an entry position in Restoration Hardware ( RH) at NYSE Arca, when my furry pal lets me know that she has to go outside, and would then like her breakfast.
Mooshi usually has a small bit of kibble topped by something healthy such as peas or string beans. This morning: No peas, no string beans. OK, I did find some carrots -- they'll have to do. Over to the kibble. Uh oh. Forgot it. I'm out of dog food. Fortunately, I found a sample from some brand I never heard of in a drawer. Bottom line: I have to run over to Petco later, and grab a 50-pound bag of Mooshi's "healthy" brand, before my little beastie requires sustenance.
The obvious takeaway is that this stuff should have been, and could have been, in my home before it mattered.
The Deal
PetSmart acquired Chewy in 2017 for $3.35 billion. At the IPO price of $22, Chewy is worth $8.77 billion. Nice trade. At the opening price of $36.07, or the last sale of $39.18, the value of this firm just keeps growing as the crowd at the New York Stock Exchange finally settles down. The firm reported a net loss of $267.9 million in 2018, and as far as I can tell, has never yet been profitable, though sales have grown rapidly. The firm was straight forward about this in its Form S-1 when planning to go public. It was also out front that PetSmart retains 70% of the firm, and will make all key decisions, not the public, as there will be two classes of voting shares. One class will run with a one-share, one-vote ratio, the other a one-share, 10-vote ratio. Guess which class PetSmart owns, and guess which class you are welcome to purchase in the secondary market this morning?
Will I Use Chewy?
As a consumer? Maybe. I am annoyed that I ran out of what my dog eats, and will have to waste time retrieving the special food that we feed her, but that's just it. She's part of this family, and she is always happy to see me. That last part matters. Nobody else is always happy to see me. We are going to feed her better than pet owners might have in the past, because we want her around for a while, and, quite frankly, domesticated animals have become quite humanized in American households in 2019.
That said, Chewy will be up against Amazon ( AMZN) , Walmart ( WMT) , and Costco ( COST) or whoever might carry Mooshi's brand, and the winner of my pet food business will be based on price, solely on price. Can Chewy do this as cheaply as can those giants? We'll see.
Will I Invest in CHWY?
I don't think so. Not this far above the IPO price. Not now. Will I be sorry? Roll the dice. Odd or Even. On one side: Beyond Meat ( BYND) and Zoom Video ( ZM) , the ones I should have chased. On the other side: Lyft ( LYFT) , and Uber ( UBER) , the ones I should have let base in some way first. Truth is you don't know how a new issue will behave after it goes public until you see it. I think maybe one could day-trade CHWY, it already has a $5 trading range for the day. However, when I do day-trade, I do like to have a MACD -- Moving Average Convergence Divergence -- staring me in the face. That requires at least some trading history. On an intra-day basis that will show up in an hour or so. Until then, this is called gambling.
Amazon is a holding in Jim Cramer's Action Alerts PLUS charitable trust.
