Squarespace aims to avoid IPO rollercoaster, opts for NYSE direct listing

By Elles Houweling

Web-hosting firm Squarespace announced on Monday that it had registered roughly 40 million shares for its direct listing on the New York Stock Exchange (NYSE) scheduled for May 19.

The New York City based company announced in January that it filed to go public with the Securities and Exchange Commission. Two months later, Squarespace raised $300m in a funding round, valuing it at $10bn and adding the web-hosting firm to the list of ‘decacorn’ technology companies.

According to GlobalData market intelligence, the recent venture financing boost was led by Dragoneer, Tiger Global, D1 Capital Partners and Fidelity Management & Research Company, the funds and accounts advised by T. Rowe Price Associates, Inc. and Spruce House with participation from existing investors Accel and General Atlantic.

Squarespace announced that it would make its New York Stock Exchange debut in a direct listing rather than an initial public offering (IPO) thus following several high-profile technology firms, including Roblox and Coinbase, which have taken this route to flotation.

Compared to an IPO, a direct listing means that no new shares are created and only existing, outstanding shares are sold with no underwriters involved. The price at debut is then determined by orders coming into the stock exchange. However, the company also wrote that the pre-IPO investors who hold the 40.4m available shares “may, or may not, elect to sell their shares of Class A stock”.

Going public through a direct listing makes it difficult to determine the opening price and the company’s market capitalisation. Squarespace explained in their prospectus that “the opening public price of our Class A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers. Based on such orders, the designated market maker will determine an opening price for the Class A common stock in consultation with our financial advisors pursuant to applicable NYSE rules.”

The risk of direct listings may trickle down to investors, as there is no support or guarantee for the share sale and no promotion by a handling bank as with an IPO. Conversely, advocates for this type of trading debut contend that it represents a more accurate way to price new shares. This argument resonates especially after the massive first-day drops in recent IPOs by Deliveroo and DoorDash.

Squarespace will start trading on the New York Stock Exchange on May 19 under the ticker symbol “SQSP”.

Founded in New York City in 2004, the company primarily provides Software as a Service (SaaS) giving its customers access to its all-in-one website building and e-commerce platform. Its features include the ability to drag-and-drop elements to create and modify web pages. The company has since expanded its business by providing hosting for e-commerce stores.

Squarespace is headquartered in New York, with additional offices in Dublin, Portland, and Los Angeles.