Birkenstock shares did not maintain their high price as it fell on its first trading day despite its growing popularity.
German shoe maker Birkenstock Holding PLC (NYSE: BIRK) saw its shares fall more than 12% on their first day of trading on the New York Stock Exchange (NYSE). Birkenstock shares closed at $40.20 a share on Wednesday, down from its opening price of $41. The initial price also valued the company at $7.55 billion, which is less than $8.6 billion Set at an IPO price of $46.
Birkenstock IPO and BIRK Shares
Birkenstock raised about $495 million after selling about 10.75 million ordinary shares. The company’s initial plan was to sell approximately 32.26 million shares at a price range of $44 to $49 per share.
Founded nearly 250 years ago in 1774 by Johann Adam Birkenstock, the company remained under family control until private equity powerhouse L. Catterton purchased a majority stake. In a 2021 deal, L Catterton purchased an undisclosed stake in a deal that valued the company at 4 billion euros (about $4.85 billion at the time). Since the acquisition, sales have increased, rising from 728 million euros to 1.24 billion euros between fiscal years 2020 and 2022. In fiscal year 2022, Birkenstock’s net income was approximately 187 million euros.
In an interview, Birkenstock CEO Oliver Reichert said that family problems contributed to the decision to list the company publicly. Reichert said:
“The best thing for the brand would be to remain under family ownership, but there were a lot of problems within the family. So we took the next best option and that was to go public and give the brand back to the people.”
Factors increasing the popularity of Birkenstock
Birkenstock’s growth was largely driven by a variety of factors. First of all, the company boasts of impressive adaptability that has helped it remain relevant for centuries. Birkenstock has also taken a direct-to-consumer approach instead of focusing on wholesale partnerships. Furthermore, the company focused its attention on selling goods at higher prices.
Known for its comfortable products, Birkenstock strives to create unique shoes with an emphasis on a number of specifications including footbeds, soles, straps, and buckles. The company recently saw new popularity for its feature in the “Barbie” movie, where Margot Robbie wore pink Birkenstock sandals.
The fashion industry, especially clothing and shoes, has declined because people are no longer spending as much on items. Still, Birkenstock’s focus on comfort has kept the company in people’s good books.
According to Alex Smith, global sector lead at research firm Third Bridge:
“Birkenstock is a long-standing brand, but it fits into the trend of embracing casual comfort in the workplace post-COVID. The global footwear market continues to grow despite the downturn, as consumers allocate their disposable income to other interests such as travel.
Last week, the CEO of independent equity research firm New Constructions caution That Birkenstock may be overvalued. David Trainor pointed out that the $8.6 billion market cap is larger than that of other shoe companies including Crocs, Skechers and Steve Madden. Noting that the only companies with larger market caps are Deckers Outdoors and Nike, Trainor warned that Birkenstock would have to make annual revenues of more than $3.8 billion to justify the valuation.
At the time of writing, Birkenstock shares are changing hands at $39.72, which is 1.19% lower than the closing level of $40.20.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip down the secrets of crypto stories to the basics so that anyone anywhere can understand without too much background knowledge. When Tolu is not deeply immersed in crypto stories, he enjoys music, loves to sing and is an avid film buff.
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