Investors keen to try on Birkenstock for size now have the definitive measurements of its impending initial public offering (IPO).
Birkenstock set terms for its imminent deal on Monday, October 2, through an F1A form filed with the Securities and Exchange Commission (SEC). Birkenstock shares will be priced between $44 and $49 apiece. With at least 32 million shares to be floated, the deal could raise up to $1.6 billion at the top end.
The IPO is expected to launch next week.
At the top of the price range, Birkenstock would achieve an initial market capitalization of $9.2 billion based on outstanding shares. On a fully diluted basis, it would raise this further to $9.9 billion.
Birkenstock first filed for a public listing with the SEC confidentially in early July before registering its F-1 form on September 12, without revealing price terms.
L Catterton – Birkenstock's current owner – will maintain approximately 83% stake after the deal concludes. The funds raised from the IPO will go to paying down debt, per the prospectus.
Goldman Sachs, J.P. Morgan, Citigroup, HSBC, and Morgan Stanley are among the lead underwriters.
Birkenstock generated $165.42 million in profit from $1.45 billion in revenues in the 12 months that ended March 31, 2023.
Sales have roughly tripled in the decade since Oliver Reichert, its current chief executive, took the helm in 2013. Last year alone, it sold roughly 30 million pairs of sandals. The firm clocked an impressive $644 million in total revenue in the six months prior to March 31 – an almost 20% year-on-year gain in sales numbers. However, its margins took a beating, with net profit sliding 45% to $40 million, in part due to higher wages and a weaker US dollar.
IPOs A Go-Go… No?
The launch of chip designer Arm last month – the biggest in almost two years – raised hopes on Wall Street that the long-dormant IPO market may return to life and further boost 2023's year-to-date equity gains. Yet initial ebullience has faded as jitters over further interest rate hikes have gripped investors.
Equities have tumbled in recent weeks, with the benchmark S&P 500 slipping roughly 5% over the past month. Dampening sentiment may make for slippery conditions underfoot as Birkenstock tries to find its feet in its initial foray into the market.
“Investor sentiment is still highly sensitive, particularly given the realization that high interest rates are set to linger,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, told Reuters.
“So, despite the heady ambitions, Birkenstock may still end up listing at a mid or lower price in the range, regardless of all the publicity.”
The trail through public markets can get slippery for shoewear firms. As Financial Times columnist John Gapper points out, Dr Martens, which also feature German orthopedic soles, has steadily declined in value since it debuted two years ago. Meanwhile, Crocs, also known for placing comfort above style, has seen a sharp sell-off this year even after investors snapped them up during the pandemic.
Investors will need to assess whether Birkenstock will befall a similar fate and just how deep a toehold it can secure in the markets, as well as how the current market mood may impact the stock's performance in its opening days of trade.