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Why Is Squarespace (SQSP) Stock Rocketing Higher Today


Max Juang /
2024/05/13 12:21 pm EDT

What Happened:

Shares of website and ecommerce tools provider Squarespace (NYSE:SQSP) jumped 13.4% in the morning session after the company announced it has agreed to be acquired by private equity firms, Permira, in an all-cash transaction valued at approximately $6.9 billion. Under the terms of the deal, Squarespace stockholders will receive $44.00 per share in cash. The purchase price represents a premium of approximately 29% over Squarespace's 90-day volume weighted average trading price and a premium of 15% over Squarespace's closing share price of $38.19 on May 10, 2024.

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What is the market telling us:

Squarespace's shares are not very volatile than the market average and over the last year have had only 8 moves greater than 5%. Moves this big are very rare for Squarespace and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 11 months ago, when the stock gained 7.8% on the news that the company announced that it has agreed to acquire the assets associated with the Google Domains business, which includes about 10 million domains. 

As context, market leader GoDaddy (GDDY) had nearly 84 million domains under management at the end of 2022, and according to VeriSign, the largest industry registrar, there are roughly 350 million domains worldwide. This means Squarespace's deal represents almost 3% of the worldwide domains. It also is a positive from a competitive standpoint, as there was always worry that Google could use its scale and financial resources to suddenly invest in and dominate the domain market. Squarespace company will provide a smooth transition for customers and keep the same renewal prices for at least a year after the deal. Squarespace will also be the only domain provider for customers who buy a domain with their Workspace subscription from Google for at least three years. The deal was anticipated to have significant long-term benefits for Squarespace in terms of revenue and free cash flow.

Squarespace is up 35.9% since the beginning of the year. Investors who bought $1,000 worth of Squarespace's shares at the IPO in May 2021 would now be looking at an investment worth $989.69.

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