The German luxury sandal maker Birkenstock is set to list its shares on the New York Stock Exchange on Wednesday, after raising $1.5 billion in its U.S. initial public offering (IPO). The company, which is backed by French luxury group LVMH, priced its 32.3 million shares at $46 apiece, valuing the 250-year-old brand at $9.3 billion.
A cautious pricing amid market volatility
The IPO price of $46 per share was in the middle of the initial range of $43 to $49, indicating some caution among investors about the future prospects of the brand. Birkenstock is the fourth major company to launch a U.S. IPO in the last four weeks, following those of chip designer Arm Holdings, grocery delivery app Instacart and marketing automation platform Klaviyo.
However, all of them have seen their shares lose some of their initial gains since then, amid a volatile market environment. As of Tuesday’s close, Instacart shares were 10% below their IPO price, while Arm and Klaviyo were 9% and 16% above their IPO prices, respectively.
“It’s clear there is some caution among investors about the path ahead for the brand, as the price set of $46 a share was at the middle, not top end of the initial range,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
A profitable brand with a loyal fan base
Birkenstock has in its favor, at least relative to Instacart, its high level of profitability. The company reported a 21% jump in revenue to 1.12 billion euros ($1.19 billion) for the nine-month period ended June 30, while its net profit for the same period fell 20% to 103.3 million euros.
The company is known for its iconic sandals with cork soles and leather straps, which have a loyal fan base among celebrities and fashionistas. The brand 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.
“The movie fueled a spike in online searches for Birkenstock sandals. Similar investor excitement could reasonably fuel near-term demand for the stock,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.
A new chapter for a family-owned business
Founded in 1774 in the German village of Langen-Bergheim, Birkenstock was run by the Birkenstock family for six generations, until a majority stake was sold to L Catterton, the private equity group backed by France’s Bernard Arnault and his luxury goods empire Louis Vuitton Moet Hennessy (LVMH), in 2021.
The deal valued Birkenstock at around 4 billion euros ($4.8 billion) at the time, and gave L Catterton a 60% stake in the company, while the remaining 40% was held by Christian and Alex Birkenstock, who are still involved in the business as co-CEOs.
The IPO will allow L Catterton to cash in on its investment and give Birkenstock access to more capital and exposure to expand its global presence and product portfolio. The company plans to use the proceeds from the IPO to repay debt, fund growth initiatives and pursue strategic acquisitions.
