Timing can be everything when it comes to IPO’s so when Birkenstock announced it was pricing at the lower end of expectations there was perhaps some concern that the book runners had some doubts about reaching the initial valuation of up to $10bn.
This caution seemed sensible at a time when the pricing came in between $44 and $49 a share, given the prevailing uncertainty that had seen US stock markets fall back and yields push higher in the days and weeks since the last Fed decision. Combine that with increasing uncertainty about the outlook for the global economy and China’s growth prospects and there was always a risk that trading might get off to a rocky start.
Against this backdrop the last thing that was needed was a profit warning last night from LVMH, whose owner Bernard Arnault also happens to own a stake in the German sandal and clog makers business.
Given that none of the money that is being raised is being used to invest in the business it therefore seems reasonable to ask why they are looking to raise the money in the first place, and if it is being used to pay down debt, then perhaps there is concern about the ability to either fund that debt, or there is some concern about the glide path of the company’s growth prospects.
On the plus side at least the business is profitable, however when you are looking at revenues of $1.2bn in the 9 months to June, it rather begs the question as to whether a valuation of $8.5bn is a fair one at a time when companies like LVMH are warning of a slowdown in revenues and sales.
That perhaps helps to explain why the shares have slipped by over 10% in initial trading as investors weigh up whether Birkenstock offers good value even if valuations in the US generally tend to be higher than they are in London.
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