Birkenstock shares slip on first day of trading

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Shares in Birkenstock dropped more than 10 per cent when they opened for their first day of trading on Wednesday afternoon, after the German sandal maker completed the third-largest US listing of the year.

The market for initial public offerings has been gathering steam recently after a prolonged slowdown, but Birkenstock’s tepid debut provides a further reminder that investors remain cautious compared to the exuberance of 2020 and 2021.

Arm, Instacart and Klaviyo all priced large IPOs at or above the top of their target ranges last month, but trading in the newly listed groups has been choppy in the weeks since.

Birkenstock opened at $41 per share, 11 per cent below the initial offering price of $46 agreed on Tuesday evening. The offer price was around the middle of its previous target range. The opening price gives Birkenstock a market capitalisation of $7.7bn based on shares outstanding, or $8.3bn on a fully diluted basis.

The deal raised almost $1.5bn for the company and L Catterton, its private equity owner. Around a third of the proceeds will be used by the company to repay debt, with the rest going to L Catterton.

The listing came less than three years after L Catterton, which is backed by French luxury fashion house LVMH, bought a majority stake in a deal that valued Birkenstock at around €4bn.

Financière Agache, the family holding company of LVMH chief executive Bernard Arnault, agreed to buy up to $325mn Birkenstock shares as part of the IPO, and Arnault’s son Alexandre will join Birkenstock’s board of directors after the deal completes. 

The Norwegian sovereign wealth fund and investment group Durable Capital Partners also agreed to act as cornerstone investors, buying up to $300mn in shares between them.

Birkenstock, which traces its roots back to 1774, reported revenue of €1.1bn ($1.2bn) in the nine months to the end of June, up 21 per cent year on year. However, net profits dropped 20 per cent to €103mn. 

A disappointing earnings report by LVMH earlier on Wednesday sparked concerns among some analysts that a post-pandemic boom in the luxury sector was coming to an end. Shares in the French group dropped almost 7 per cent after it reported slowing sales growth in the third quarter.

It was the second of L Catterton’s portfolio companies to list in the past few months, following online beauty retailer Oddity Tech’s listing on the Nasdaq exchange in July.

Falling volatility and rising share prices have encouraged a tentative rebound in listings in recent months, but investors and bankers have cautioned that they don’t expect a full return to normal volumes until early 2024 at the earliest.