For investors who enjoy dissecting initial public offerings (IPOs), this year has been much better than 2022. The IPO market has bounced back slightly, after all but shutting down last year. Birkenstock (NYSE:BIRK) is the latest notable IPO. BIRK stock hit the market at $46 per share yesterday, only to sink roughly 17% from this level at the time of writing.
Today marks the first full day of trading for BIRK stock, which is down another 5% in afternoon trading. Yesterday’s shaky start is making headlines as it’s not par for the course. Most IPOs are strategically priced lower than where the insiders think the stock should trade. This allows for immediate appreciation and the potential for over-allotment shares to be bought at a discount by the consortium of banks bringing the deal public.
This isn’t the case with the popular footwear maker, so investors may be wondering what to make of this debut. Let’s dive into a few things investors may want to know about the company on its first full trading day.
BIRK Stock Sinks on First Full Trading Day
Birkenstock’s decline following its public offering is worth paying attention to. After all, it is a relatively rare event. Indeed, Bloomberg data suggests that, “out of more than 300 US IPOs of that size in the past century, only 13 have fared worse.” That’s not great for investors considering this stock from a momentum standpoint.
That said, it is worth noting that Birkenstock is a footwear maker that is very profitable. The company’s nine-month €103 million profit on revenue of €1.12 billion is rivaled by only the best brands in the business. Thus, this is a company with some solid margins and what appears to be strong fundamentals.
Now, Birkenstock’s valuation of roughly 50 times earnings isn’t cheap, and investors are paying up for growth. However, for those seeking a world-class brand and a business model that’s clearly worked (given the longevity of this name), Birkenstock certainly seems like an interest stock to either bet on, or put on the watchlist. Personally, this is a stock I’ll be following closely from here.
On the date of publication, Chris MacDonald did not have (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.
