Amazon – The Amazon of Russia Makes Its IPO

With a market capitalization of $1.6 trillion, Amazon.com ((NASDAQ:AMZN)) is now the fourth-most invaluable publicly traded firm on the earth. However what if you happen to may return in time to 2002, and purchase Amazon when it was nonetheless low-cost — say, about $6 billion in market cap? Would you want to try this?   

As a result of in a method you may have the ability to — by investing in just-IPOed Ozon Holdings PLC (NASDAQ:OZON).

The Amazon.com of Russia 

Headquartered in Nicosia, Cyprus for tax causes, Ozon Holdings does enterprise nearly completely in Russia, working as an internet-based purveyor of every part from toys to electronics, to furnishings, meals, and fast-moving shopper items. Along with promoting items itself, it permits third-party sellers to promote items on its web site. Its enterprise thus mirrors that pioneered by Amazon.com, which went public within the U.S. in 1997.

Ozon was established simply two years later, in 1999, by which period Amazon was already doing greater than $1 billion in annual gross sales. It is taken till 2020 for Ozon to move the $1 billion gross sales mark. (The unique Amazon has racked up $348 billion in gross sales over the past 12 months, in response to information from S&P World Market Intelligence.) However having achieved that, the corporate felt it was lastly prepared to carry an IPO of its enterprise on the Nasdaq — and did so on Tuesday at an IPO price of $30 a share. 

Earlier than making its preliminary public providing debut, although, Ozon filed an F-1/A submitting with the SEC, laying out its enterprise, its prospects, and its financials for potential buyers to have a look.

Get to know Ozon

And what do we discover in that submitting? Let’s start with the fundamentals.

Ozon calls itself “essentially the most trusted and revered on-line retailer in” Russia, and says its title “has turn into synonymous with on-line buying” within the nation. Market share-wise, nonetheless, Ozon is barely No. 2, with a 6.6% share of the Russian e-commerce market. The highest three home e-commerce corporations, which embody bigger Wildberries and smaller Yandex (NASDAQ:YNDX) subsidiary “Beru,” management solely a complete share of 18%.

Nevertheless, Ozon is rising — presumably by taking enterprise from even smaller gamers. In a market the place e-commerce gross sales grew 51% year-over-year within the first half of 2020, Ozon’s year-to-date gross sales grew 70%. 8,100 sellers use Ozon to promote to prospects numbering both 51 million (those that have downloaded its buying app), 41 million (those that have ever shopped on Ozon), or 11.Four million (“energetic consumers” who’ve used the service inside the previous 12 months). 

About 51% of Ozon’s gross merchandise quantity, or GMV, are gross sales instantly from Ozon to shoppers. 45% of GMV is high-margin gross sales from third events to shoppers performed on Ozon’s Market. And but this hasn’t but turned Ozon right into a worthwhile operation. Though gross sales are rising strongly, and on tempo to hit 102 billion Russian rubles this 12 months ($1.three billion) on the present progress fee, losses usually are not shrinking a lot (down lower than 2% year-over-year).

The consequence: Ozon has already misplaced about $170 million up to now this 12 months, and is prone to finish the 12 months with a web loss.

What buyers must know to value Ozon

Ozon offered 33 million American Depositary Shares on IPO day, Tuesday. It offered one other 4.5 million in a simultaneous personal placement, and plans to promote practically 5 million extra shares as underwriters train their overallotment choices. (In the event you’re counting, that is 42.5 million shares, complete). At an IPO price of $30, it will in the end increase near $1.three billion to fund the corporate’s continued enlargement.

In response to its prospectus, the corporate will most likely find yourself with 184.2 million ADSs excellent after the underwriters train their choices. And since Ozon shares appreciated sharply after their IPO, rising previous $40 a share, the corporate’s complete market capitalization is at present $7.Four billion. 

Divided by my greatest estimate of $1.three billion in gross sales this 12 months, that works out to a price-to-sales ratio of 5.7 — solely a bit richer than Amazon‘s valuation — and with extra room to develop.