The Birkenstock IPO is already being described as one of the worst billion dollar plus stock market debuts in the last decade. That’s according to Renaissance Capital.
The stock was down 12.9% after its first day of trading, and off by 21% by the end of the week. Admittedly it was a brave move to IPO Birkenstock with US rates still running high and an unforeseen war brewing in the Middle East.
Of the 95 IPOs that have raised at least $1 billion in the last 10 years, only five have done worse (remember AppLovin anyone)?
While it looks now like the listing might have been a little over-priced, Birkenstock shares will find their floor eventually, which could in turn create a buying opportunity. The stock bounced off the $36 level on Friday and now seems to be showing some signs of life.
Once we start to get more clarity on the real price the market will pay for the shares, we can also think more about the fundamentals.
Is Birkenstock worth a look?
Birkenstock is a long-standing brand but it fits into the trend of embracing casual comfort in the workplace after COVID. It continues to grow even in the face of a declining global footwear market, as consumers allocate their disposable income to other interests, such as travel.
The current growth is being driven by a younger, new consumer base and its rising popularity among celebrities – even Barbie has been spotted wearing Arizona sandals.
“Let’s not forget that Birkenstock has a rich history spanning 250 years, and its loyal customer base keeps returning,” explained Alex Smith, global sector lead at Third Bridge, a stock research house. “Our experts say the likelihood of Birkenstock going out of fashion and following a similar path to Allbirds is very low.”
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Third Bridge consulted with a number of executives in the footwear space who told it that future growth for Birkenstock could come from their improving manufacturing capabilities, which would allow them to meet increasing global demand and venture into new markets.
Female consumers still make up the majority of Birkenstock’s customer base, primarily because of the sizing options available due to manufacturing limitations.
“India has tremendous market potential as Europe and the US are becoming more mature markets for Birkenstock,” Smith said. “However, the brand may not carry the same level of recognition in Asia as it does in Europe and the US, so building brand equity will be crucial.”
IPO market stirring back to life
Pricing of IPOs remains very difficult in the current market. The temptation is always to price them higher than is possibly realistic. In the case of Birkenstock, however, despite the initial sell off, possibly prompted by the news out of Israel as well, it seems there is now some buying activity in the market.
Some analysts also remain concerned about the impact of inflation on the high end retail sector: numbers out from LVMH last week could be the end of the recent bull run in this sector.
There are also signs that the IPO market in the US may be stirring back to life, with a lot of private companies sitting on the side lines. Note though that private equity funds are heavily over-loaded with companies they would dearly like to IPO, and are starting to get impatient. So said one Swiss fund manager to The Armchair Trader last week.
