Stock Sale

Rocket on IPO Launch: We Have Ignition

  • Why it matters

    Why it matters

    Rocket Internet’s flotation is a test of Berlin’s nascent start up scene. Can these technology companies, many of which have yet to make a profit, survive in the open market?

  • Facts

    Facts

    • Rocket Internet is planning a €750 million ($970 million) floatation.
    • Rocket’s existing shareholders, including the founding Samwer brothers, will maintain their percentage stakes.
    • A German real estate company, LEG Immobilien, raised €1.6 billion in an IPO in January.
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    Audio

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Rocket Internet, a German start-up incubator, said Wednesday it plans to raise €750 million ($970 million) by selling its first shares over the Frankfurt Stock Exchange in one of Europe’s most widely anticipated flotations.

The company, a specialist in copying successful digital businesses from Silicon Valley and introducing them in emerging markets, said in a statement that it will use the money from the sale to fund a global expansion.

Rocket said it aims to become “the world’s largest Internet platform outside of the United States and China.”

Since its creation by the brothers Oliver, Marc and Alexander Samwer in 2007, Rocket Internet has grown quickly, through investing in online retail and service providers worldwide. It now operates in more than 100 countries.

One of its highest profile investments is online fashion retailer Zalando, which announced its own plans to go public earlier this month.

 

G S34 Rocket Internet FZ Geld-01

 

Rocket Internet’s flotation will shine a light on the company’s complex structure and operating methods, which have been criticized as opaque and complex.

The holding company has 1,500 online stores, some with headquarters in tax havens such as Luxembourg. Several companies within the group do not report annual results and most are unprofitable. It has also been criticized for simply cloning ideas from more successful online retailers.

On a conference call with journalists, co-owner Oliver Samwer said Rocket had a proven track record of revenue creation.

“Our vehicle offers higher capital-efficient and low risk exposure to the sector by proven, scalable business models,”  he said.

Mr. Samwer said he did not believe the lack of profitability at Rocket posed a problem.

“We are not giving details of financial performance today. We are investing for growth. We are not targeting profitability right now. We do have clear paths to long term profitability,” he said.

The company said the IPO will take place later this year, and will consist of new shares from a capital increase. All existing shareholders will maintain their stakes. The main shareholders are the Samwer brothers, who hold a 52.3 percent stake, and Kinnevik, a  Swedish private equity firm, with an 18.1 percent stake.

There will be one class of voting stock for all shareholders, Rocket said.

The company has recently added investors, including German Internet provider United Internet with 10.4 percent.

Philippine Long Distance Telephone holds 8.4 percent and billionaire Len Blavatnik’s Access Industries holds 8.3 percent.

The venture capital firm Holzbrink Ventures acquired a 2.5 percent stake through investments in seven Rocket Internet companies including the food delivery service Hello Fresh and online furniture retailer Home24.

The company said it will list its shares on the Frankfurt Stock Exchange in the unregulated Entry Standard segment and eventually move onto the Prime Standard sub-exchange. It is expected that Rocket will use proceeds from the initial public offering to promote the international expansion of its online businesses.

The IPO will be co-ordinated by Berenberg, J.P. Morgan and Morgan Stanley, with Bank of America’s Merrill Lynch, Citigroup, and UBS Investment as bookrunners.

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