Squarespace shares: Where next after shaky debut?

• Squarespace Inc (NYSE: SQSP) share price dips to US$49.56 a share
• It did not go public via an IPO, instead choosing a direct listing
• The stock opened below the reference price of US$50 per share
• Its growth plans include expanding its e-commerce customer base
• Buy and sell Squarespace stocks with an IG account

Squarespace share price: What's the latest?

Two days after a disappointing debut, shares of Squarespace still have not crossed the so-called reference price assigned by the bourse operator.

The newcomer on the New York Stock Exchange (NYSE) fell 0.6% day-on-day to end at US$49.56 on Friday (21 May 2021). It had climbed 14.3% to close Thursday at US$49.87.

Squarespace had opened at US$48 last Wednesday (19 May 2021) for its debut. That is down 4% from its reference price of US$50, set by NYSE as a guide for investors and to satisfy the mechanics of opening trading.

The SQSP stock went on to close its first day at US$43.65, giving it a market value of about US$5.9 billion. That is a steep drop from its valuation of US$10 billion after a funding round in March, Reuters reported.

Why did Squarespace not go the IPO route?

Under its direct listing - chosen over a traditional initial public offering (IPO) - Squarespace did not issue new shares to raise capital.

Its existing investors could generally start selling shares based on demand when trading opens, without waiting for a lock-up period to expire, Bloomberg noted. The debut price is determined by orders coming into the stock exchange.

The New York-based website-hosting service is backed by growth-equity firm General Atlantic, as well as venture-capital firms Index Ventures and Accel, among other investors.

Squarespace founder and CEO Anthony Casalena previously said the firm chose a direct listing partly because it would be ‘a little bit independent of what’s happening on any given day in the market’.

Its lacklustre debut came amid a broader market sell-off, as inflation worries and cryptocurrency price plunges prompted US stock markets to decline for three straight days.

Squarespace was the first direct listing in recent months to finish its first day of trading below the reference price, Bloomberg noted.

What are Squarespace's next steps?

The website building and hosting company last year reported total revenue of US$621 million, up 28% from US$485 million in 2019. However, net income stood at around US$31 million in 2020, nearly half of US$58 million in the previous year.

Squarespace intends to expand beyond web hosting and into e-commerce, the company said in regulatory filings. Its growth plans include widening its customer base, especially internationally, and deepening its commerce offerings.

Its e-commerce business recorded US$143 million in revenue last year, up 78% from 2019.

Moreover, Squarespace is also eyeing further strategic acquisitions to accelerate its key platform, product and marketing initiatives.

In March, it acquired restaurant-services provider Tock, which provides technology for online reservations and takeout services, for over US$400 million.

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