👉 Background: Chemist Warehouse is the pharmacy with aisles tighter than compression socks and the jingle more catchy than Hot Potato by the Wiggles. But since its first store in 2000, Chemist Warehouse has grown to more than 600 stores around Australia.

‍👉 What happened: Back in December 2023, Chemist Warehouse announced its plans to merge with Sigma Healthcare. After back-and-forth with the ACCC (competition regulator), it was approved. And yesterday was the hard-launch day as Chemist Warehouse merged with Sigma Healthcare. Once listed, it sprinted from a private company to the 19th largest company on the ASX worth $32 billion.

‍👉 What else: With so few big-name companies listing on the ASX lately, there have been a HEAP of buyers interested in getting a slice of Chemist Warehouse... and some sellers too. In particular, Chemist Warehouse franchisees. Unlike the Chemist Warehouse founders, the franchisees’ shares were un-escrowed - so they’re making it rain faster than nasal spray.

What's the key learning?

💡Shares in escrow is where a portion of a company's shares, typically held by pre-IPO investors, can't be sold on the market until certain conditions are met. It’s designed to prevent a flood of shares hitting the market all at once, which could crash the share price.

💡Chemist Warehouse’s co-founders own 48.3% of the merged company so if they were to sell all of their shares on Day 1, it would likely cause a crash. In addition, it would be very concerning signal to investors if the founders were to cash out so soon. This is why the Chemist Warehouse founders can’t sell any shares before the end of August this year when Sigma announces its FY25 results. The remaining 90% of their shares can’t be sold until after FY26 results.

💡On the other hand, Chemist Warehouse franchisees, who own about 37.5% of the shared in the merged company, aren’t under escrow terms. And with so much interest in Chemist Warehouse stock, many franchisees have already jumped at the chance to cash in.