Following a long drought in high-profile initial public offerings (IPOs), sandal maker Birkenstock is allegedly poised to help enliven proceedings. With the company targeting its public market debut in mid-October, hopes are running high that the Birkenstock IPO may go against the grain. However, this assessment clashes with the reality of some recently disappointing new listings.
According to a CNBC report, Birkenstock filed its IPO registration statement on Sept. 12. Apparently, this deal comes over two years after the Birkenstock family “sold a majority stake in the company” to LVMH (OTCMKTS:LVMUY) affiliated private equity firm L Catterton.
Fundamentally, prospective investors of the Birkenstock IPO are enthused about two factors. First of all, since the majority stake sale, the footwear company has seen some strong growth. Secondly, the brand also received a bump following its recent cameo in the movie Barbie.
CNBC reports that Birkenstock plans to launch its debut with an $8 billion valuation and have its shares trade under the “BIRK” ticker on the New York Stock Exchange. The latest information also suggests that management is targeting the IPO to land in mid-October.
Still, while enthusiasm for the brand may run high, that’s clashing against a harsh environment for new listings currently.
Birkenstock IPO Faces the Fire
Just a few weeks ago, investors eagerly looked forward to the market for new listings. In the first half of the year, EY reported that the global IPO market raised approximately $60 billion, down 36% year-over-year (YOY). Naturally, the recent, planned debuts of British chip designer Arm (NASDAQ:ARM) and Instacart (NASDAQ:CART) have helped reinvigorate sentiment.
However, what should have been a decisively positive framework for the Birkenstock IPO has become much more ambiguous. Following a solid debut for Arm, Instacart hiked its IPO range. Unfortunately, though, both enterprises have disappointed early-bird investors since.
ARM stock’s initial offering price came in at $51 per share while CART stock’s IPO price ultimately landed at $30. Right now, both stocks trade just barely above those respective marks. Of course, that result bodes ominously for BIRK stock.
To be sure, every new listing must be assessed on its own merits. And the data suggests it’s possible for the Birkenstock IPO to succeed where other market debuts have failed. For example, Seeking Alpha reports that, at the time of the majority stake sale to L Catterton, Birkenstock carried a valuation of around $4.3 billion. Any boost from the Barbie cameo is nothing to scoff at, either. As of Sept. 4, Barbie has earned over $1.4 billion at the global box office.
Why It Matters
Ultimately, the success of BIRK stock may be in the hands of the Federal Reserve. Although policymakers have framed monetary policy (and the subsequent economic impact) in positive terms, the central bank hinted at one more rate hike this year. As a result, many investors are rotating out of risk-on assets. That may affect the Birkenstock IPO.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
