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Poland’s newest stock listing became the largest company on the country’s main exchange, highlighting investor demand for technology exposure as the Eastern European nation is introduced to Nasdaq-level valuations. SA shares jumped as much as 61% to 69.20 zloty in its first trading session in Warsaw on Monday. Settling at about 50% higher from its listing price in the first hours of trading, the company is now valued at 67 billion zloty ($17.7 billion). The firm and its private-equity investors priced the IPO at the top end of a marketed range, cashing in on soaring demand for digital sales as consumers stuck at home indulge in virtual retail therapy.

“Allegro provides high exposure to the fast-growing Polish e-commerce market and draws comparison to Amazon, which may be an attractive investment option for foreign investors, who took up most of the shares in offering,” Jaroslaw Niedzielewski, head of investments for Investors TFI mutual fund, said in an email. “But the scale of the price jump is a shock.”

© Bloomberg Valuation Game

Before the trading start, analysts at Bernstein estimated Allegro’s enterprise value to earnings before interest, taxes, depreciation and amortization to be about 37, above the likes of Inc and Alibaba Group Holding Ltd, but below MercadoLibre Inc. and European fashion retailer Zalando SE, according to data compiled by Bloomberg.

“Allegro was priced close to global technology leaders as it’s already one of the biggest e-commerce companies in the world, which bring interest of many funds that accept higher valuations, given oversupply of the capital,” Haitong analyst Konrad Ksiezopolski said in emailed comments. “E-commerce is a winning industry during the pandemic, which should help the stock. Time will show the impact from competition of Amazon or AliExpress, which is a real test of Allegro’s valuation.”

The company is betting on the continued expansion of online shopping in Poland, a market of 38 million people and one of the European Union’s most resilient economies. Allegro is touting lower fees, a loyalty program with free deliveries, ans high number of local merchants to fend off global competition. Inc. is still selling its products to Poles from Germany, while China-based AliExpress relies on lengthy shipping processes.

“Allegro’s story started over 20 years ago in a garage in Poznan,” Chief Executive Officer Francois Nuyts said at the opening ceremony in Warsaw. “It’s normally the story you hear in different continents. But to have this story be such a success in Poland is actually amazing.”

The CEO also pledged more investment and hiring. A new wave of coronavirus infections in Poland may end up benefiting the firm, further accelerating the switch to online purchases. In the first half of the year, the company’s sales and net income rose about 50% on year as the platform became the premier selling venue for many smaller shops cut off from their clients during lockdown.

Bernstein analyst Aneesha Sherman expects Allegro to have plenty of opportunities to expand to broader Eastern European markets, which are more fragmented and easier to scale up. Still, the company hasn’t announced such plans, saying that it wants to keep its focus on Polish consumers.

Index-Driven Demand

“Local investors saw Nasdaq-level valuations in an IPO for the first time,” Investors TFI’s Niedzielewski said. “But their allocation is much below expected weight of Allegro in WIG20 index, which probably triggers more buying.”

Allegro is now the country’s largest listed company and is expected to be added swiftly to major equity indexes. Inclusion in Warsaw’s WIG20 benchmark is likely to happen after the market closes Wednesday, and its anticipated addition to MSCI gauges at a later date may also fuel demand. After Monday’s surge, Allegro is worth more than twice the country’s biggest bank and third-largest stock, PKO Bank Polski SA. The Polish benchmark’s current leader is another lockdown winner, game developer CD Projekt SA.

While fellow online shopping emporium THG Holdings Ltd. posted one of the best first-day pops in London for at least two years in September, floats on European exchanges have fared less well over the past two weeks. Military supplier Hensoldt AG, Russia’s state-owned tanker operator Sovcomflot OAO, Lithuanian electric utility AB Ignitis Grupe, camper-van maker Knaus Tabbert AG and China Yangtze Power Co. all slumped in their debut sessions.

The Warsaw Stock Exchange delayed Allegro’s opening by 15 minutes to avoid any potential overflow of its trading system, as a substantial number of shares in the IPO were sold to a fragmented group of more than 36,000 retail buyers. Allegro’s private equity owners — Cinven, Permira and Mid Europa Partners’ funds — remain the controlling shareholders in the platform and pledged not to sell more shares within 180 days following the debut. Allegro will publish third-quarter earnings on Nov. 26.

© Bloomberg Low Free Float

(Adds investor comment in 3rd paragraph, CEO in 6th paragraph, updates chart.)

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