At the end of 2009 we went out on what felt like a bit of a limb by predicting that a limited number of retail IPOs would be successful this year. At the time, we envisaged that as the market recovered investors would regain some appetite for retail. We still felt it would be tricky to float in 2010, but for retailers with a good growth story, and crucially, realistic not opportunistic pricing, the market would be open.
Eight months latter and we have seen two retailers list. One hired the cream of investment banks and generated a huge amount of hype, while the other went quietly about its business confident that its strong track record would speak for itself. One has never made a profit while the other is comfortably in the black. Crucially, one correctly valued itself and has seen its share price skyrocket, while the other had to cut its initial price range and has seen its shares slump.
If you hadn’t already guessed the retailers I am talking about here are SuperGroup, who sell clothes under the Superdry label. It has demonstrated a masterclass in how to pull off a successful flotation. The other is Ocado.
The delivery firm which brings me my Waitrose goodies may have hogged the headlines, but only just managed to get its flotation away, albeit at a price below expectations. The point here is that investor money is out there at the moment for the right retail business, but it isn’t a walk in the park. Investors will drive a hard bargain with new issues, especially ones that don’t fully engage.
Are the IPO floodgates about to open? I think not. However, I still believe we will see a couple more retail businesses come to market before the end of the year, just as long as they are priced pragmatically.