Birkenstock Goes Public, But the Ride Has Been Rocky

While down from 2021 levels, initial public offerings, or IPOs, are up this year after dropping significantly in 2022. One of the more recent high-profile companies to go public is German shoe manufacturer Birkenstock (NYSE:BIRK), which hit the market on Wednesday.

Less than two days in, it has been a bit of a rocky start for Birkenstock, although this has not been unusual for recent IPOs.

Going public at $46 per share

Birkenstock was founded in Germany in 1774 by Johann Birkenstock, and 249 years later, the iconic brand is bigger than ever, making an appearance in the blockbuster Barbie movie. It had been family-owned until 2021, when private equity firm L Catterton acquired a majority stake and brought it public.

The sandal maker enjoyed a 20% compound annual growth rate in revenue between 2014 and 2022, with the last two years seeing its revenue spike 32% and 29%, respectively. Birkenstock ended 2022 with €1.24 billion (US$1.32 billion) in revenue, and this year through three quarters, revenue was up 21% over the first nine months of 2022. 

The company was valued at $8.64 billion and offered at $46 per share in its IPO Tuesday. That fell within its expected range of $44 to $49 per share.

The stock began trading on the New York stock Exchange on Wednesday at $41 and ended the day at $40.20. Overall, the stock was down about 12.6% in the first full day of trading from the IPO price, and as of 3 p.m. Eastern on Thursday, it had fallen another 6% to $37.78. Investors apparently found the offering price too expensive, given the economic backdrop of high inflation and an uncertain economy.

One of the biggest IPOs this year

Birkenstock is certainly not the first IPO to struggle out of the gates in 2023, despite the fact that this has been a bounce-back year for the overall stock market.

In the past month, there have been a handful of good-sized IPOs, including Klaviyo (NASDAQ:KVYO), an e-commerce marketing company that uses artificial intelligence (AI); Maplebear (NASDAQ:CART), the parent company of food delivery company Instacart; biopharma firm Adlai Nortye (NYSE:ANL); and Arm Holdings (NYSE:ARM), a semiconductor company.

It has been a mixed bag for those four, as Adlai Nortye (-53%) and Maplebear (-17%) are down, while Klaviyo (+11%) and Arm Holdings (+7%) are up since their IPOs. Birkenstock is the second-highest priced IPO this year after Arm, which debuted on Sept. 14 at $51 per share.

According to Renaissance Capital, which tracks U.S. IPOs, there have been 88 IPOs priced so far this year, up 38% from the same time last year. The proceeds raised from those IPOs are up 180% from a year ago at $18.2 billion. Overall, 139 IPOs have been filed in the U.S. year to date, which is up 22% from a year ago. However, 2022 was the worst year for IPOs in several decades.

The market is tough for retailers right now, as some of Birkenstock’s competitors like Nike (NYSE:NKE), Buckle (NYSE:BKE), Foot Locker (NYSE:FL) and (NASDAQ:CROX) have all seen double-digit declines this year. Of course, when an IPO price looks too high to begin with, given the market and the blurry economic outlook, it may be best to wait and see where Birkenstock settles, as it could have further to fall before it finds the right price.

Source valuewalk