With a market capitalization of $1.6 trillion, Amazon.com (AMZN -1.64%) is now the fourth-most valuable publicly traded company in the world. But what if you could go back in time to 2002, and buy Amazon when it was still cheap -- say, about $6 billion in market cap? Would you like to do that?
Because in a way you might be able to -- by investing in just-IPOed Ozon Holdings PLC (OZON).
"Black Friday discounts on the whole universe up to 90% off!" Image source: Ozon.
The Amazon.com of Russia
Headquartered in Nicosia, Cyprus for tax reasons, Ozon Holdings does business almost exclusively in Russia, operating as an internet-based purveyor of everything from toys to electronics, to furniture, food, and fast-moving consumer goods. In addition to selling goods itself, it allows third-party sellers to sell goods on its website. Its business thus mirrors that pioneered by Amazon.com, which went public in the U.S. in 1997.
Ozon was established just two years later, in 1999, by which time Amazon was already doing more than $1 billion in annual sales. It's taken until 2020 for Ozon to pass the $1 billion sales mark. (The original Amazon has racked up $348 billion in sales over the last 12 months, according to data from S&P Global Market Intelligence.) But having accomplished that, the company felt it was finally ready to hold an IPO of its business on the Nasdaq -- and did so on Tuesday at an IPO price of $30 a share.
Before making its initial public offering debut, though, Ozon filed an F-1/A filing with the SEC, laying out its business, its prospects, and its financials for potential investors to take a look.
Get to know Ozon
And what do we find in that filing? Let's begin with the basics.
Ozon calls itself "the most trusted and respected online retailer in" Russia, and says its name "has become synonymous with online shopping" in the country. Market share-wise, however, Ozon is only No. 2, with a 6.6% share of the Russian e-commerce market. The top three domestic e-commerce companies, which include larger Wildberries and smaller Yandex (YNDX) subsidiary "Beru," control only a total share of 18%.
However, Ozon is growing -- possibly by taking business from even smaller players. In a market where e-commerce sales grew 51% year-over-year in the first half of 2020, Ozon's year-to-date sales grew 70%. 8,100 sellers use Ozon to sell to customers numbering either 51 million (those who have downloaded its shopping app), 41 million (those who have ever shopped on Ozon), or 11.4 million ("active buyers" who have used the service within the past year).
About 51% of Ozon's gross merchandise volume, or GMV, are sales directly from Ozon to consumers. 45% of GMV is high-margin sales from third parties to consumers conducted on Ozon's Marketplace. And yet this hasn't yet turned Ozon into a profitable operation. Although sales are growing strongly, and on pace to hit 102 billion Russian rubles this year ($1.3 billion) at the current growth rate, losses are not shrinking much (down less than 2% year-over-year).
The result: Ozon has already lost about $170 million so far this year, and is likely to end the year with a net loss.
What investors need to know to value Ozon
Ozon sold 33 million American Depositary Shares on IPO day, Tuesday. It sold another 4.5 million in a simultaneous private placement, and plans to sell nearly 5 million more shares as underwriters exercise their overallotment options. (If you're counting, that's 42.5 million shares, total). At an IPO price of $30, this will ultimately raise close to $1.3 billion to fund the company's continued expansion.
According to its prospectus, the company will probably end up with 184.2 million ADSs outstanding after the underwriters exercise their options. And because Ozon shares appreciated sharply after their IPO, rising past $40 a share, the company's total market capitalization is currently $7.4 billion.
Divided by my best estimate of $1.3 billion in sales this year, that works out to a price-to-sales ratio of 5.7 -- only a bit richer than Amazon's valuation -- and with more room to grow.
