Birkenstock, known for its iconic cork-soled clogs, is poised to make its long-awaited debut as a publicly traded company. The German shoe manufacturer is set to price its initial public offering (IPO) on Tuesday evening, with shares expected to be available for trading on the New York Stock Exchange starting Wednesday under the ticker symbol BIRK.
According to recent filings, Birkenstock aims to price its IPO between $44 and $49 per share, projecting around $450.2 million in net proceeds from the offering. If the IPO exceeds the expected range, the company stands to receive even higher proceeds.
In a recent report by Reuters, it was revealed that Birkenstock has secured ample commitments to warrant pricing its offering at the top end of its range, ultimately reaching a staggering valuation of $10 billion. This figure surpasses previous estimates that predicted the company's valuation to be around $8 billion.
Even at the lower valuation, Birkenstock's market capitalization would outshine that of competitors like Allbirds (BIRD), Skechers (SKX), Crocs (CROX), and Steve Madden (SHOO). Additionally, the valuation would be nearly double the amount L Catterton, a private-equity firm, paid to acquire Birkenstock earlier this year—approximately $4.3 billion.
The impressive valuation reflects the incredible success Birkenstock has experienced in recent years. In fiscal 2022, the company's revenue skyrocketed from €727.9 million ($770.9 million) to €1.24 billion ($1.3 billion), marking substantial growth. Within that same timeframe, net profit saw an impressive increase of about €86 million ($91 million).
Neil Saunders, a managing director and retail analyst at research firm GlobalData, attributes Birkenstock's remarkable performance to its strong revenue growth and the unwavering confidence in the brand. As Saunders affirms, "There has been some good levels of growth there, and I think there's a degree of confidence around the brand as well. It looks to be quite a strong IPO."
Despite the optimism surrounding the IPO, some skeptics remain unconvinced. David Trainer, CEO at investment research firm New Constructs, argues that for Birkenstock to justify its $8 billion valuation, it would need to generate more than $3.8 billion in annual revenue—roughly three times its fiscal 2022 revenue. As he noted in a research note last week, "We don't see this happening anytime soon, if ever. BIRK looks more than fully valued and does not provide investors much upside potential."
In conclusion, Birkenstock's forthcoming IPO has garnered significant attention within the industry. With an expected valuation of either $8 billion or $10 billion, the company's success story and brand confidence have captivated both supporters and skeptics alike. As the IPO commences, the market eagerly awaits the outcome and potential future for this renowned footwear brand.
Birkenstock: A Safe Haven in the IPO Market
Looming over Birkenstock's much-anticipated public debut is a sense of caution spurred by recent IPOs that experienced a downward trend after the initial excitement. Companies like chip designer Arm Holdings (ARM), delivery platform Maplebear (CART), and fast-casual restaurant chain Cava Group (CAVA) have all seen their stock prices drop below their opening trades. Even footwear brand Allbirds, which had a promising start with an opening price of $21.21 in November 2021, now trades at under a dollar, with a market valuation of around $144 million.
However, experts believe that Birkenstock is unlikely to follow the same path as its counterparts. Alex Smith, global sector lead at research firm Third Bridge, asserts that Birkenstock's situation is different from Allbirds' due to its extensive history, spanning over 250 years, and a loyal customer base.
This sentiment is echoed by Jeremy Saunders, an analyst at GlobalData. Saunders highlights that struggling IPOs like Instacart carry a higher degree of risk due to their relatively new business models. In contrast, Birkenstock operates on a "very vanilla" retail model that the market is already familiar with, making it a safer option for investors seeking stability.
Moreover, Birkenstock has garnered support from a number of backing companies. L Catterton, which merged with the private equity arm of LVMH Moët Hennessy Louis Vuitton (LVMHF) in 2016, will maintain its majority ownership of the company. Additionally, Birkenstock has attracted financing offers from reputable investors such as Financière Agache, Durable Capital Partners, and Norges Bank Investment Management, according to filings.
In these uncertain times, investors gravitate towards safe havens, and Birkenstock seems to fit that narrative. With its rich history, loyal customer base, and support from key investors, Birkenstock is poised to defy the downward trend that has affected other IPOs in recent months.
