had been underpriced. Investors who sold in the all-secondary offering “still own about 85 percent, so focusing on what they own, they might be happy,” said one banker whose bank had a role in the IPO. “The one thing for sure is this helps the IPO sentiment in Europe.” One banker who was not involved said the issue, which will raise 947 million euros including an overallotment option, was underpriced. “It is difficult to be in the shoes of the pricing banks …typically a successful IPO goes up 10-15 percent,” he said.
“But the message is not that the IPO market is up and flying. Investors are very selective.” Prior to Adyen, the 10 biggest IPOs in Europe by gross proceeds so far this year rose less than 6 percent on average above their offer price on their first day of trading, according to Eikon data and Reuters calculations. Adyen’s sale was only open to institutional investors, and the company said on Tuesday it had been oversubscribed “multiple times.” Books had been covered at the top price within an hour of the offer being launched on June 5, which the head of a syndicate involved in the float said may have been “unprecedented.” Adyen helps retailers take customer payments and usher them through complicated payment networks quickly.
Its fast growth, its flashy customer and investor lists, together with the relatively small number of shares on offer, recent strength in technology shares, and fevered M&A in the payments segment, all bolstered demand for shares of the previously little-known company. Still, there are reasons for investor caution. The issue price was more than 70 times Adyen’s 2017 earnings before interest, taxes, depreciation and amortization of 99.4 million euros. The company, which is debt-free and profitable, says it expects to grow sales by 25-35 percent annually. Among major risk factors in its prospectus, Adyen cited fierce competition and the fact that its top 10 clients, which also include Vodafone, Uber and Spotify, represent around 33 percent of sales. Those high-profile clients may demand concessions or defect to competitors, as eBay did when it decided to abandon former owner PayPal for Adyen in January. It later emerged that eBay was offered warrants worth up to a 5 percent stake in Adyen in exchange. Adyen will face competition from rivals like WorldPay WP.O, which was bought last year by U.S. credit-card processing company Vantiv for $10.4 billion. U.S. giant PayPal (PYPL.O) agreed to buy smartphone payment terminal provider iZettle last month for $2.2 billion. Worldline bought Swiss payments processor SIX Group for $2.75 billion. U.S. fintech rivals such as Square and Stripe are also growing quickly, and some major online retailers including Amazon (AMZN.O) and Alibaba (BABA.N) are developing their own payment systems. Adyen’s offer is primarily a way for existing investors, which include the likes of General Atlantic, Index Ventures and Iconiq Capital, the Silicon Valley fund that is an investment vehicle for the founders of Facebook, LinkedIn and Twitter. Including overallotments, existing shareholders sold 13.4 percent of shares in the offering, which is secondary only. With remaining shares subject to a six-month lockup period, only a relatively small number of shares were in play on the first day of trading. In the first hour of trade, a little more than 600,000 shares traded hands – only 2 percent of the total outstanding. “Liquidity is thin. People are sitting on their shares and that’s what’s driving the price up,” said one person familiar with the deal. Adyen co-founder and CEO Pieter van der Does, whose around 1.6 million shares in the company are worth nearly 700 million euros at current prices, eschewed any public appearances in the run-up to the IPO, meeting only with private investors. That made some sense given the business-to-business nature of the company and a business model that may not be readily understood by retail investors. Less traditional was his decision not to ring the gong or hold any celebration at Euronext in Amsterdam on Wednesday. Some observers were also surprised by his decision not to opt for a listing on Nasdaq. “I’m very proud to be building this company with such a great team,” Van der Does said in a statement issued on Tuesday night. “This listing will only help us to continue to do what we are doing now: helping our merchants grow and reshaping the payments industry.” Investor Jan Hammer of Index Ventures, Adyen’s largest shareholder, said the successful listing was “proof that even in a traditional and highly regulated industry, building a powerful, global business is possible”. He said the company handled 108 billion euros in transactions last year out of an estimated $23 trillion globally and had room to grow despite the competition. Another personal familiar with the IPO said it “wasn’t mispriced.” “They wanted pop,” he said, referring to the company’s founders and early investors.