Birkenstock finished its first trading day on the New York Stock Exchange Wednesday 12.6% lower.
Shares of the German sandal maker closed at about US$40 after opening at about US$41, below its initial public offering (IPO) pricing of US$46 per share.
The prevailing uncertainty that has seen the US stock markets fall back and yields push higher in the days and weeks since the last Fed decision combined with China’s growth concerns meant there was always a risk that Birkenstock’s trading might get off to a rocky start, according to CMC Markets UK chief market analyst Michael Hewson.
“Against this backdrop, the last thing that was needed was a profit warning last night from LVMH, whose owner Bernard Arnault also happens to own a stake in the German sandal and clog makers business,” Hewson said.
“Given that none of the money that is being raised is being used to invest in the business it therefore seems reasonable to ask why they are looking to raise the money in the first place, and if it is being used to pay down debt, then perhaps there is concern about the ability to either fund that debt, or there is some concern about the glide path of the company’s growth prospects.”
He pointed out that, on the positive side, at least the business is profitable.
“However when you are looking at revenues of $1.2 billion in the nine months to June, it rather begs the question as to whether a valuation of $8.5 billion is a fair one at a time when companies like LVMH are warning of a slowdown in revenues and sales,” Hewson said.
“That perhaps helps to explain why the shares have slipped by over 10% in initial trading as investors weigh up whether Birkenstock offers good value even if valuations in the US generally tend to be higher than they are in London.”
Shares of Birkenstock continued to fall in after-hours trading, down another 1.4% to US$39.65 on Wednesday evening.
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