After Arm, Instakart, and Klaviyo, hopes were high that Birkenstock would be the next big brand to shake up the initial public offering (IPO) market from its slumber.
On Wednesday, October 11, Birkenstock commenced trading on the New York Stock Exchange (NYSE) under the ticker symbol “BIRK.”
Equities retreated dramatically through September with dampening sentiment, making the market slippery underfoot, yet the German sandal maker confidently strode out all the same. Just days prior to its debut, it was reported to have enough backing to attain a $10 billion valuation. But it was not to be – Birkenstock lost its grip on day one, slipping sharply by 13% to close out its first day at $40.20, 13% below its offering price of $46. Its market capitalization now stands at just shy of $7.5 billion.
BIRK was not dragged down by the broader market either. Benchmarks rose on Wednesday, with the S&P 500 index inching 0.4% upwards and the Nasdaq climbing 0.7%.
The flop casts questions over Birkenstocks' market potential.
There's little doubt about the brand's strengthening appeal among consumers. It has grown topline revenue for many years. Sales roughly tripled in the decade since Oliver Reichert, its current chief executive, took the helm in 2013. The brand racked up a solid $644 million in total revenue in the six months prior to March 31 – almost 20% year-on-year growth. Yet while sales beefed up, margins slimmed down. Its net profit slid 45% to $40 million in no small part thanks to macroeconomic factors of higher wages and a weaker US dollar.
IPO… No?
Birkenstock isn't the only recent IPO whose star fizzled soon after launching.
Last month, chipmaker Arm staged the biggest IPO of the year. The firm may have debuted in the mid-$60 range, is now trading around $54. Meanwhile, the marketing platform Klaviyo has barely gained. After rising and falling since it launched around $34, it is now swapping hands for around $33.
Yet both these companies finished their debut days higher.
Birkenstock was not so lucky. Strong sales growth and the cultural buzz from its recent cameo in the box office smash Barbie over the summer were not enough to move the needle to reach the firm's target valuation.
Commenting on the deal's fate, a Wall Street veteran and New Constructs CEO David Trainer told Forbes “not a whole lot has changed” for Birkenstock since its 2021 valuation of $4.7 billion.
“Investors should have learned a valuable lesson in the past few weeks when it comes to IPOs.”
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.
