Investors hungry for new consumer brands finally had a trendy deal to check out this week.
On Wednesday, October 11, Birkenstock launched its initial public offering (IPO), commencing trade as a public company on the New York Stock Exchange (NYSE) under the ticker symbol “BIRK.”
The highly-anticipated deal comes after an ambitious IPO roadshow by the company to woo institutional investors. Just days ago, the firm was reported to have secured enough backing to attain a $10 billion valuation. Hot off a buzzy cameo appearance in the recent Barbie movie, the stage seemed set for Birkenstock to put its best foot forward into public markets. Yet the shoemaker lost its footing before the day was done. BIRK sunk to $40.20, down 13% from its offering price of $46.
The broader market, by contrast, rose slightly, with the S&P 500 index inching 0.4% upwards.
The dramatic slide is bad optics for Birkenstock and a blow to the still-recovering IPO market. According to the Wall Street Journal, it is uncommon for large firms with widely recognized brands to end their debut day down. Stock issuers and their underwriters do all they can to avoid closing in the red.
Sole-Searching Season
Birkenstock’s stroll to the public markets began in the summer after it first filed for a public listing with the SEC confidentially in early July before registering its F-1 form on September 12. Later, the company set terms for its deal on Monday, October 2, through an updated F1A form filed with the Securities and Exchange Commission (SEC). At the time, Birkenstock announced its shares would be floated between $44 and $49 apiece. With at least 32 million shares to be offered, the deal was expected to raise up to $1.6 billion at the top end. This would have given Birkenstock an initial market capitalization of $9.2 billion based on outstanding shares and on a fully diluted basis, $9.9 billion.
Yet, in the end, the company issued shares at the $46 dollar mark – the midpoint of its price range, before sliding further to around $40. Its market capitalization now stands at just shy of $7.5 billion.
Founded in 1774 in the German village of Langen-Bergheim, the boutique brand stayed a family-run business for six generations until they sold a majority stake to L Catterton (which will continue to own nearly 83% of Birkenstock following its launch).
Once something of a fashion faux pas worn by comfort-seekers, Birkenstock has garnered cultural clout over the years. The brand has done partnership deals with luxury brands, including Dior, Stüssy, Manolo Blahnik, and Rick Owens.
Birkenstock booked 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, partly thanks to the macroeconomic factors of higher wages and a weaker US dollar.