Birkenstock IPO tripped up by 'reckless' valuation, former LVMH chair says
Birkenstock's (BIRK) highly anticipated public debut — a test for the IPO market resurgence — failed to meet expectations.
The stock opened at $41 per share on the New York Stock Exchange on Oct. 11 after being priced at $46 per share, marking it the worst debut by a company worth over $1 billion in nearly two years, Reuters reported.
A week later, Birkenstock stock is looking to claw back a gain after sliding as much as 21% in the first week of trading. Shares rose Tuesday but moved lower again in early trading on Wednesday, trading over 4% off its Oct. 11 opening price.
"I think the reaction is more a reflection of the pricing than it is the quality of the stock," Pauline Brown, former chair of LVMH North America, told Yahoo Finance (video above). "I say they were too greedy in coming out at $46 a share. ... I think it was too aggressive and a bit reckless."
The stock's rocky debut puts the 249-year-old German premium footwear maker alongside other major companies to IPO this year, including SoftBank-backed Arm (ARM), Instacart (CART), Cava (CAVA), and Klaviyo (KVYO), all of which are trading below their IPO prices.
"I think a big issue has been the reset in valuations for growth companies," University of Florida professor Jay Ritter said. "With a company like Birkenstock, which is much more mature, there's less uncertainty. But there's still uncertainty about its ability to grow future profits."
Investors hoped the recent slate of major companies going public would solidify a comeback in the IPO market. However, the class was subject to slumping shares and volatility, signaling doubt amongst investors. Companies eyeing IPOs will likely think long and hard about coming to the public markets.
"When you look at what's happened with the recent IPOs, it has not been the performance that anyone has wanted," PitchBook US venture capital lead analyst Kyle Stanford told Yahoo Finance Live. "These IPOs are just not finding the interest that they were hoping for. ... So it doesn't bode well for the rest of 4Q or even early 2024."
Birkenstock faces other challenges that go beyond a disappointing initial public offering, such as concerns about consumer spending, particularly as it has repositioned its brand.
The brand falls under the "nice to have" category, Torch Capital founder Jon Keidan told Yahoo Finance's Brooke DiPalma last week. Although the product became known for its functionality and orthopedic support, it has since become a luxury and, therefore, more vulnerable to weakening discretionary demand.
"Nowadays, if you look at who's buying it, it is more akin to sneakerheads and fashionistas," Brown said. "So a lot of the newer growth is built upon a more modern-day branding, and that will be tested as to whether that's sustainable."
"That is a much harder audience to sustain or to build on than the original audience of orthopedic and hippies who were living with it for a good generation," she added.
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