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Birkenstock shares go public in New York: debacle for the traditional sandal manufacturer
The traditional sandal brand Birkenstock failed in its IPO in New York. The share fell almost 13 percent below the issue price on the first day of trading. The price decline continued on the second day. As a rule, companies aim for a higher issue price when going public in order to provide investors with a positive return. In the case of Birkenstock, this goal was clearly missed. The reasons for this failure can be varied. On the one hand, the price could have been set too high, on the other hand, the demand for Birkenstock shares could simply have been too low. The fashion sector is currently dealing with economic uncertainty and a...
Birkenstock shares go public in New York: debacle for the traditional sandal manufacturer
The traditional sandal brand Birkenstock failed in its IPO in New York. The share fell almost 13 percent below the issue price on the first day of trading. The price decline continued on the second day. As a rule, companies aim for a higher issue price when going public in order to provide investors with a positive return. In the case of Birkenstock, this goal was clearly missed.
The reasons for this failure can be varied. On the one hand, the price could have been set too high, on the other hand, the demand for Birkenstock shares could simply have been too low. The fashion space is currently struggling with economic uncertainty and tighter consumer budgets, which are impacting the attractiveness of IPOs in this industry. Still, Birkenstock has a solid business record and profits, which is usually attractive to investors.
The impact of this failed IPO could be far-reaching. Birkenstock had set an issue price of $46, which was already at the lower end of the previously established price range. However, investors were not happy with this valuation. It can be assumed that this negative outcome of the IPO affects investor confidence in the company and the fashion sector as a whole. It could become more difficult to successfully carry out further IPOs in the fashion sector.
However, similar failures in IPOs are not an isolated case. Companies like Uber and Instacart have had similar experiences with shares trading below the issue price when they debuted. In both cases, however, prices recovered over time.
For Birkenstock itself, the IPO resulted in proceeds of almost $1.5 billion. The main owner L Catterton received around two thirds of this. The company plans to use the proceeds to reduce debt and emphasizes its long-term growth.
Birkenstock, headquartered in Linz am Rhein, looks back on a centuries-long history. In recent years, the brand has evolved and become a fashion accessory, including through collaborations with luxury brands such as Dior and Manolo Blahnik. In the first half of the current financial year, Birkenstock increased sales by 18.7 percent to around 644.2 million euros, but profits fell due to unfavorable exchange rates.
Source: According to a report from www.zeit.de
Read the source article at www.zeit.de