Investors should have learned a valuable lesson in the past few weeks when it comes to IPOs. If the valuation is sky-high, that may be something of a red flag, according to David Trainer, chief executive of independent equity research company New Constructs. The company uses machine learning and natural-language processing to parse corporate filings and model economic earnings, although its research has encountered pushback.
Chip maker Arm Holdings Ltd.
ARM,
+3.66%
and grocery-delivery app Instacart
CART,
+2.90%
both hit public markets at high valuations and both have fallen back since then, Trainer wrote in a new report. The same may happen to Birkenstock Holding Ltd.
BIRK,
,
which is expected to debut next week. The German company known for its iconic sandals and clogs has plans to offer 32.3 million shares priced at $44 to $49 each. The company would have a valuation of $8.7 billion at the midpoint of that price range, Trainer noted. That’s a bigger market cap than peers such as Skechers USA Inc.
SKX,
+0.87%,
Crocs Inc.
CROX,
-0.52%
and Steve Madden Ltd.
SHOO,
+0.26%.
For more, see: Birkenstock is going public: 5 things to know about the iconic German sandal maker’s IPO designs “Even more shockingly, the only footwear companies with a larger market cap are Nike
NKE,
+0.84%
and Deckers Outdoor
DECK,
+0.54%.
While Birkenstock isprofitable, we think it is fair to say that the $8.7 billion valuation mark is too high, especially for a company that was valued at just $4.3 billion in early 2021. Not a whole lot has changed since then,” the report said. Trainer estimated that Birkenstock would need to generate more than $3.8 billion in annual revenue to justify that valuation, which is more than th …
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