×

Rocket Internet prices shares, values firm $8B

Rocket Internet, the German start-up conglomerate, has priced shares for its initial public offering at a midpoint market capitalisation of €6.2bn, in what is set to be the largest flotation for a European technology company in years.

The company said on Tuesday it would sell shares for between €35.50 and €42.50.

Read MoreNext up after Alibaba: Biggest bank IPO ever

The Microsoft Digital Eatery is part of the new Microsoft Berlin center.  Berlin, Germany
Sean Gallup | Getty Images
The Microsoft Digital Eatery is part of the new Microsoft Berlin center. Berlin, Germany

Founded by brothers Oliver, Marc and Alexander Samwer in 2007, Rocket is a hybrid venture capital group and incubator that claims to have industrialised the process of building start-ups. The brothers are set to become billionaires, holding a 52.3 per cent stake that is set to be valued at €3.2bn.

Detractors have described Rocket as a "clone factory", but the Berlin-based company makes no secret of adapting successful business models to Europe and emerging markets, focusing on three sectors: ecommerce, online marketplaces and financial services.

The company expects to raise €1.477bn from the offer at the midpoint of the range, assuming the maximum number of shares is placed.

Read MoreClone wars: How start-ups take on the copycats

The cash will be used to fuel Rocket's expansion, launching new ventures and raising stakes in its existing companies so that it can retain majority ownership as they mature. This marks a change to its existing business model, since Rocket has funded much of its growth with outside investors and does not own controlling stakes in most of its companies.

The challenge for fast-growing companies such as Rocket is to make sure that what they spend on marketing and infrastructure does not swallow up all of the value they are getting from consumers.

Rocket's most mature companies, 11 businesses which it refers to as "proven winners", generated net revenues of €757m in the last fiscal year for which data are available. They made net losses of €442m.

Read MoreJack Ma: We don't need 'secret government support'

The prospectus notes: "Nearly all of our companies have limited operating histories, are significantly loss making, have a negative operating cash flow, require significant capital expenditure and may never be profitable or cash generating."

Financial data published on Tuesday evening showed that Rocket Internet had sales revenues for 2013 of €72.5m, though this does not capture all the businesses in which Rocket has a stake.

The holding company burnt through €117m of cash in the first six months of this year on its operations and investments, compared with €25.2m in the first six months of 2013.

It swung from a net profit of €22.3m in the first half of last year to make a net loss of €13.3m in the first six months of 2014. It said this deterioration was due to a decrease in income from its companies and "increases in other operating expenses and personnel expenses".

Read MoreThe Twitter account blowing the Internet's mind

Insiders argue that this is not an accurate reflection of the company's performance as the income statement does not cover revenues from its most established businesses.

Rocket said cornerstone investors including JPMorgan Securities and an investment trust managed by Baillie Gifford Co had committed to purchase €582.5m of shares.

More from the FT:
Jimmy Choo confirms plans for London IPO
Alibaba lights up US listings market
Scotland vote to unleash London IPOs

All shareholders, including cornerstone investors, have committed to a 12-month lock-up period. The offer period will commence on Wednesday, September 24, and Rocket will list on the Frankfurt stock exchange on October 9.

The news comes as investors are flocking to ecommerce stocks. Last week Alibaba, the Chinese internet company, pulled off the biggest public flotation by listing on the New York Stock Exchange at a market capitalisation of $25bn.

Read MoreAlibaba IPO propels China Web market across the globe

Oliver Samwer, founder and chief executive, said in a statement: "Through our operating platform, we are building and scaling the internet giants of tomorrow. We are taking proven ecommerce business models to over 75 per cent of the world's population and around 75 per cent of its mobile users, who all live in countries outside the United States and China."

Rocket is best known for successfully launching Zalando, now Europe's biggest online fashion retailer and also planning an IPO. Rocket has largely divested itself from Zalando though the Samwer brothers retain a personal stake of 17 per cent.