By Manya Saini, Niket Nishant and Chibuike Oguh
(Reuters) - Birkenstock's stock ended more than 12% below its initial public offering (IPO) price on Wednesday in an underwhelming Wall Street debut that signaled investors remain cautious about new listings.
Shares of the 250-year-old German sandal maker started trading at $41 after the IPO had priced at $46. That offering raised $1.48 billion, priced at the midpoint of the indicated range of $44 and $49 on Tuesday. The stock closed at $40.20, down 12.61%.
The 11% decline from Birkenstock's IPO price on Tuesday to its opening price on Wednesday marks the worst debut by a company worth over $1 billion in nearly two years, according to LSEG data.
Birkenstock's weak performance comes weeks after the high-profile market debuts of chip designer Arm Holdings (NASDAQ:ARM), grocery delivery app Instacart (NASDAQ:CART) and marketing automation platform Klaviyo (NYSE:KVYO). The shares of those companies have mostly fallen since their listings, indicating weak investor demand.
"What this shows is that the valuations that they are putting (on) these companies make absolutely zero sense, particularly when you're in a down market when there's so many other bargain opportunities available," said Thomas Hayes, chairman at Great Hill Capital in New York.
"If you're putting out new paper that no one would pay for existing companies, what you're going to see is that after the initial pop, you're going to see a drop," Hayes added.
At its closing share price on Wednesday, Birkenstock had a market capitalization of more than $8 billion. That is still double the $4.35 billion at which L Catterton, the U.S. private equity firm backed by French billionaire Bernard Arnault and his luxury goods empire Louis Vuitton Moet Hennessy, paid to acquire a majority stake in the shoemaker in 2021.
L Catteron will continue to own nearly 83% of Birkenstock following its market debut, which coincides with a sharp drop in LVMH's shares on Wednesday following slower third quarter sales growth. Arnault's son, Alexandre, will join Birkenstock's board.
Founded in 1774 in the German village of Langen-Bergheim, the company was run by the Birkenstock family for six generations until they sold a majority stake to L Catterton.
Birkenstock has partnership deals with luxury fashion brands, including Dior, Stüssy, Manolo Blahnik and Rick Owens.
The company had disclosed a 21% jump in revenue to 1.12 billion euros ($1.19 billion) for the nine-month period ended June 30. Its net profit for the same period, however, fell 20% to 103.3 million euros.
Birkenstock gained widespread attention after Australian actress Margot Robbie wore a pair of pink Birkenstocks in the final scene of the hit movie, "Barbie," which was released this summer.
($1 = 0.9431 euro)