Poland's Largest-Ever Initial Public Offering

Poland's Largest-Ever Initial Public Offering

over 3 years ago2 mins

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Polish ecommerce phenomenon Allegro hit the stock market on Monday – and its immediate 63% price rise suggests the company also hit the right note with investors 🎶

What does this mean?

Poland’s largest-ever initial public offering saw Allegro raise $2.3 billion at an $11 billion valuation, instantly becoming the country’s biggest stock. Just a few hours later, however, the company was already worth $18 billion.

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Allegro’s lively first-day movement appeared due to global investor appetite for Eastern Europe’s early-stage answer to Amazon. With just 8% of Polish retail sales currently conducted online versus 20% in the US, the stage is set for growth to crescendo 📈 And while Allegro is competing with the American giant, its investors are betting the firm’s local focus will help maintain its market-leading position.

Why should I care?

One popular way to compare etailers’ valuations is the “enterprise value (EV) to sales” ratio; given that their high cost of growth often leads to losses, such sales-based metrics are typically more useful than profit-based ones 🤓 To calculate a company’s EV, you add its stock market value to its debt and subtract any cash in the bank. The ratio shows Amazon is worth four times its sales, and China’s Alibaba seven – while Allegro, valued at 20 times its annual revenue, is the most “expensive” ecommerce stock in the world. In other words, the company’s current share price already anticipates a lot of future growth – and if it doesn’t deliver, its stock might quickly fall.

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Allegro’s imminent inclusion in major European stock indexes will trigger up to $300 million worth of additional demand for its shares from exchange-traded funds which automatically invest in such indexes’ companies 💰 The biggest beneficiaries of the frenzy, however, are the private equity investors who continue to own the majority of Allegro’s stock…

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