Monday 24 June 2019

Payment firm's market debut evokes tech bubble

Pieter van der Does, co-founder and CEO of Adyen. Photo: Ore Huiying/Bloomberg
Pieter van der Does, co-founder and CEO of Adyen. Photo: Ore Huiying/Bloomberg

Toby Sterling

Shares in Adyen, which handles the payments backend for Netflix, Facebook and eBay, doubled yesterday in a market debut reminiscent of the 1999 tech bubble.

After a highly sought initial public offering, shares in the Dutch company had been priced on Tuesday at €240, the top of their indicated range, suggesting a market capitalisation of €7.1bn. After the first hour of trade on the Euronext exchange yesterday the share price had hit €480.

As several European IPOs were pulled in May, bankers will be hoping the strong interest in Adyen will spill over into other upcoming deals, such as German online furniture retailer Home24.

Adyen's sale was only open to institutional investors, and the company said on Tuesday it had been oversubscribed "multiple times".

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 amortisation of €99.4m.

The company, which is debt-free and profitable, says it expects to grow sales by 25-35pc annually.

Among major risk factors in its prospectus, Adyen cited fierce competition and the fact its top 10 clients, which also include Vodafone and Uber, represent around 33pc of sales.

Those high-profile clients may demand concessions or defect to competitors, as eBay did when it decided to abandon PayPal for Adyen in January. It later emerged eBay was offered warrants worth up to a 5pc stake in Adyen in exchange.

Adyen will face competition from rivals like WorldPay, which was bought last year by US credit-card processing company Vantiv for $10.4bn (€8.8bn).

US giant PayPal agreed to buy smartphone payment terminal provider iZettle last month for $2.2bn (€1.8bn). Worldline bought Swiss payments processor SIX Group for $2.75bn.

US fintech rivals such as Square and Stripe are also growing quickly, and some major online retailers, including Amazon and Alibaba, 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 14.2pc of shares in the offering, which is secondary only, to net €947m.

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 2pc of the total outstanding.

Co-founder and CEO Pieter van der Does, whose around 1.6 million shares in the company are worth nearly €700m at current prices, said: "This listing will only help us to continue to do what we are doing: helping our merchants grow and reshaping the payments industry."

Investor Jan Hammer of Index Ventures, Adyen's largest shareholder, said the company had room to grow.

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