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Startup incubator Rocket Internet to become an operating company post its €1.48B IPO

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German startup incubator Rocket Internet‘s initial public offering (IPO) has been fully subscribed, joint co-ordinator JP Morgan has said in a statement yesterday (Hat tip – Reuters). Rocket Internet co-founder Oliver Samwer told in a press conference that the offering was fully subscribed within the first hour of taking orders.

Rocket Internet had first announced plans to launch a IPO on the Frankfurt Stock Exchange earlier this month. The company was looking to raise around €750 million in gross proceeds through this offering. However, earlier this week, Rocket Internet announced that it is doubling this amount to €1.477 billion (around $1.9 billion) at a market cap of €6.16 billion (around $7.86 billion).

The company is selling 32.9 million newly issued shares (32,941,177 shares) at a price range of €35.50 – €42.50 per share. In addition, there is a potential over-allotment option for up to 4.9 million shares (4,941,176 shares). This translates to a total offering of 37.88 million shares which accounts for 24% of the company.

Major investors acquiring shares in IPO: Rocket Internet also informed that a number of cornerstone investors including an investment trust managed by Baillie Gifford & Co, and J.P. Morgan Securities LLC have committed to purchase shares worth €582.5 million at the offer price in the IPO. Of this, Baillie Gifford & Co., led by its Scottish Mortgage Investment Trust Plc, has committed to purchase shares worth €350 million while J.P. Morgan Securities LLC has committed to purchase shares worth €100 million.

It’s worth noting that this IPO consists solely of new shares and none of the existing shareholders, including the new cornerstone investors are selling any shares as part of this offering for at least 12 months.

Rocket Internet shareholders currently include Global Founders (the investment vehicle of Samwer and his brothers), Investment AB Kinnevik, Access Industries, Philippine Long Distance Telephone Company, United Internet and HV Holtzbrinck Ventures and some of their affiliates. Rocket Internet is planning to start trading on the Frankfurt Stock Exchange on October 9, 2014.

Rocket Internet Shareholding

Using IPO proceeds to turn from incubator to operating company

Rocket Internet plans to use most of its IPO proceeds to launch new businesses and provide further investment to its existing network of companies. The company mentions that this IPO will enable them to provide funding to its companies beyond the seed round in a bid to retain majority stake in these companies over the longer term.

It also intends to invest in some of its younger companies to maintain majority stake in select younger companies over the long terms. In addition, Rocket Internet also plans to use these proceeds to consolidate its stake in some of its more established companies.

Rocket Internet co-founder and CEO Oliver Samwer told in a press conference that following the IPO, they plan to take a more hands-on role in its network of companies, thereby transforming themselves an operating company from its prior role as an incubator.

He added that this IPO will enable them to invest in their companies significantly longer, which they previously couldn’t due to lack of funds. They will now apparently look to retain majority control of the companies they create and focus on building and operating these companies under the Rocket Internet umbrella.

Note that Rocket Internet and Kinnevik group had merged its Indian fashion e-commerce brand Jabong with four other emerging markets focused fashion e-commerce brands into a single group called Global Fashion Group (GFG) earlier this month. More on GFG funding and shareholding here. Also read a list of Rocket Internet-backed companies in India here.

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