Birkenstock’s IPO Might’ve Given Some Investors Cold Feet

Birkenstock’s IPO Might’ve Given Some Investors Cold Feet
Stéphane Renevier, CFA

5 months ago2 mins

What’s going on here?

Footwear brand Birkenstock’s initial public offering (IPO) got off on the wrong foot, with wary investors needing more than socks to warm up to the frozen market.

What does this mean?

According to the Barbie movie, Birkenstock sandals aren’t just a comfortable choice: they’re transformative tools that enlighten a wearer to “the truth about the universe”. So naturally, investors were expecting an awakening when Birkenstock debuted on the New York Stock Exchange. Well, looks like we’re not quite in sync with Barbie Land. Birkenstock’s shares landed at just over $40 at the end of day one, below their $46 IPO price. That’s the bumpiest first-day run for any $1 billion-plus US listing in the last two years. In fact, of the over 300 big-ticket US IPOs in the past century, only 13 have done worse. So despite being the third-biggest debut in the US this year, the listing did little to reassure investors about the struggling IPO market.

Birkenstock stock
Source: Google Finance

Why should I care?

For markets: It’s the sole that counts.

LVMH’s less-than-luxe results on Wednesday suggested that the high-end retail industry’s recent success is tailing off. And sure, chunky sandals aren’t exactly couture, but with collaborators including Dior and Valentino, Birkenstock has at least one toe in the luxury market. But the footwear firm has the other nine spread all over: the sandals’ diverse sporters are pretty evenly split across different generations, with the typical US wearer owning three pairs. And as a business, Birkenstock is consistently growing, supported by major backers, and makes a profit – rare for a newly public company.

Birkenstock revenue
Source: Statista

The bigger picture: Set a good example.

The IPO market has been stirring after a long slumber, with activity up just over a third versus the same time last year. Problem is, three-quarters of those newly listed companies are currently trading below their debut prices. If that tide doesn’t change, the dozens of private companies currently considering IPOs will be sure to twiddle their thumbs for a while longer.

IPO market
Source: Bloomberg
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