The Tribune

By CHRIS ILLING

CCO @ ActivTrades Corp

The day after the IPO (initial public offering), Birkenstock investors are still not happy. The traditional sandal manufacturer experienced a debacle in its eagerly-awaited share offering in New York.

The Birkenstock share placement raised just under $1.5 bn. About two-thirds of this will go to the main owner, L Catterton, which is linked to the luxury group, LVMH, and its billionaire boss, Bernard Arnault.

Birkenstock ended the past fiscal year with sales of 1.24bn euros and a profit of 187m euros. In the first half of the current fiscal year, which closed at the end of March 2023, Birkenstock increased sales by 18.7 percent to around 644.2m euros. The bottom line was a profit of 40.2m euros, compared to around 73.5m euros a year earlier. The decline was mainly due to unfavourable exchange rates.

Investors caused the stock to fall almost 13 percent below the issue price on the first day of trading last week. On the second day, the descent continued. Usually, companies attach importance to finding a price point at which there is a considerable plus at the start of trading. In the case of Birkenstock, this went badly wrong.

Birkenstock had already set the issue price at $46 - rather cautiously in the middle of the previously set range of $44 to $49. However, even that was too much for investors. The first price on Wednesday was $41, more than 10 percent below the issue price. After that, things got even worse and, at the close of trading, the stock cost almost 12.6 percent less at $40.20. Birkenstock thus came to a valuation of $7.55bn. In early trading on Friday, the price fell another 5 percent to the $36.50 mark.

The climate for IPOs, especially in the fashion sector, is not the best, especially with economic worries and tighter consumer budgets. But when chip designer Arm went public four weeks ago, its stock jumped by a fifth, yet it is now currently trading below the high mark. And, unlike many unprofitable companies whose share prices took off at the IPO, Birkenstock can point to a solid business and operates at a profit.

But, based on the solid performance of the company, investors will keep a close eye on the share price and will wait for the best entry point to enter the market.