IPO Report: Birkenstock’s valuation is too high and investors may not make money in its IPO, analyst says

by | Oct 5, 2023 | Stock Market

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.
and grocery-delivery app Instacart
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.
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.
Crocs Inc.
and Steve Madden Ltd.
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
and Deckers Outdoor
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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