Chewy Stock Slides As Investors Digest $500M Offering From Largest Shareholder

Chewy Inc CHWY shares are moving lower in Wednesday’s after-hours session after the company announced a public offering by a selling stockholder and a concurrent share repurchase.

What Happened: After the market close on Wednesday, Chewy announced an underwritten public offering of $500 million of its common stock, being sold by Buddy Chester Sub LLC, an entity affiliated with funds advised by Chewy’s largest shareholder BC Partners Advisors.

The selling stockholder plans to grant the underwriters a 30-day option to purchase up to an additional $75 million of Chewy common stock. Chewy will not be selling any shares in the offering, and will not receive any proceeds.

In connection with the offering, Chewy agreed to purchase $50 million of its common stock at the same price paid by the underwriters in the offering. The repurchased shares will be retired upon completion. The concurrent repurchase was approved by a special committee of Chewy’s board.

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Chewy shares are up approximately 37% year-to-date. The rally in the pet retailer’s stock accelerated over the summer after meme stock trader Keith Gill, also known as “Roaring Kitty,” announced a stake in the company.

Gill sold his entire stake in Chewy a few months later. Chewy shares fell on the news, but the selloff was short-lived. Chewy had been Gill's only other publicly known investment outside of GameStop Corp GME, which has seen increased attention in recent months.

GameStop and several other meme stocks popped last week after Gill posted an image of a TIME magazine cover featuring a blank computer screen and a video player paused at the 1:09 mark of a 4:20-long video. Chewy shares traded lower on the post.

Chewy reported mixed quarterly financials last week, beating on earnings but missing on revenue. The company guided for fourth-quarter revenue of $3.18 billion to $3.2 billion versus estimates of $3.17 billion.

Following the print, Goldman Sachs lifted its price target to $40, RBC Capital raised its target to $42 and JPMorgan maintained an Overweight rating and moved its price target up to $38.

CHWY Price Action: Chewy shares were down 2.92% in after-hours, trading at $31.59 at the time of publication Wednesday, according to Benzinga Pro.

Photo: Courtesy of Chewy.