What's going on?

Polish ecommerce phenomenon Allegro hit the stock market on Monday � and its immediate 63% price rise suggests the company also hit the right note with investors.

What does this mean?

Poland�s largest-ever initial public offering saw Allegro raise $2.3 billion at an $11 billion valuation, instantly becoming the country�s biggest stock. Just a few hours later, however, the company was already worth $18 billion.


Allegro�s lively first-day movement appeared due to global investor appetite for Eastern Europe�s early-stage answer to Amazon. With just 8% of Polish retail sales currently conducted online versus 20% in the US, the stage is set for growth to crescendo. And while Allegro is competing with the American giant, its investors are betting the firm�s local focus will help maintain its market-leading position.

Why should I care?

For markets: Expensive business.

One popular way to compare etailers� valuations is the �enterprise value (EV) to sales� ratio; given that their high cost of growth often leads to losses, such sales-based metrics are typically more useful than profit-based ones. To calculate a company�s EV, you add its stock market value to its debt and subtract any cash in the bank. The ratio shows Amazon is worth four times its sales, and China�s Alibaba seven � while Allegro, valued at 20 times its annual revenue, is the most �expensive� ecommerce stock in the world (tweet this). In other words, the company�s current share price already anticipates a lot of future growth � and if it doesn�t deliver, its stock might quickly fall.

The bigger picture: Everyone wants in.

Allegro�s imminent inclusion in major European stock indexes will trigger up to $300 million worth of additional demand for its shares from exchange-traded funds which automatically invest in such indexes� companies. The biggest beneficiaries of the frenzy, however, are the private equity investors who continue to own the majority of Allegro�s stock�