Birkenstock opens 11% below IPO price in trading debut flop

Birkenstock Holding Plc’s shares opened trading 11% below their price in the company’s $1.48 billion initial public offering, in a debut that could cool what had been a fledging rebound in U.S. listings.

The German sandal maker’s debut is the worst opening for a listing of $1 billion or more in New York in over two years, according to data compiled by Bloomberg. Out of more than 300 U.S. IPOs of that size in the past century, only nine have fared worse, the last being AppLovin Corp., which opened 12.5% below its IPO price in April 2021, the data show.

In a fourth big test of the U.S. market in a month, the German footwear maker’s shares opened trading Wednesday at $41 a share after selling for $46 in the IPO. The offering itself was priced below the midpoint of the marketed range of $44 to $49, with Birkenstock and its private equity owner, L Catterton, selling about 32 million shares on Tuesday.

The shares were down 10% to $41.25 at 2:11 p.m. in New York, giving the company a market value of $7.75 billion. Including shares reserved for executives, directors and employees, the company has a diluted value of about $8.37 billion.

The company sold 10.8 million of the shares, while L Catterton offered 21.5 million. The buyout firm and its affiliates will continue to own about 83% of the stock and control the company, according to filings with the U.S. Securities and Exchange Commission.

The offering was led by Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley. Birkenstock shares are trading on the New York Stock Exchange under the symbol BIRK.

The IPO comes after the biggest month for U.S. listings since January 2022, according to data compiled by Bloomberg. U.K. chip designer Arm Holdings Plc, backed by SoftBank Group Corp., raised $5.23 billion including so-called greenshoe shares in September, followed by and grocery delivery startup Instacart at $660 million and marketing and data automation provider Klaviyo Inc. with a $576 million IPO.

Arm’s shares have gained a modest 7% from their IPO price, while Instacart is trading 15% below its offer price. Klaviyo has fared the best of the cadre but even after a 22.5% jump in its trading debut, its IPO investors have seen a return of 11%.

The mixed performance by those three and now Birkenstock sharpen the focus on whether dozens of startups that have been eying the public market will decide to move ahead or keep waiting. Those companies include an array of diverse businesses such as activewear brand Vuori Inc., weight-loss drugmaker Carmot Therapeutics and GameChange Solar, whose backers include a Koch Industries affiliate, among other candidates, Bloomberg News has reported.

Unlike many of the IPO candidates, Birkenstock is profitable, according to its filings. The successor company had a net profit of €103 million ($109 million) on revenue of €1.12 billion for the nine months ended June 30, compared with €129 million on revenue of €925 million for the same period a year earlier.

Birkenstock plans to use proceeds from the offering to repay debt.

Billionaire LVMH Chairman Bernard Arnault’s family holding company, which has already invested in Birkenstock, was set to buy as much as $325 million of shares in the IPO. The Norwegian sovereign fund and T. Rowe Price Group Inc. veteran Henry Ellenbogen’s Durable Capital Partners LP had expressed interest in buying as much as $300 million of stock in aggregate, according to the filings.

As much as 8% of the shares in the listing have been set aside for employees at the IPO price, according to the filings.

Founded nearly 250 years ago, Birkenstock’s sandals have been sold in the U.S. since 1966 and are today worn by preppies and hippies alike. The company has become a high-fashion brand, launching collaborations with luxury names such as Dior, Manolo Blahnik and Valentino, and spawning variants from labels including Celine and Givenchy.

Birkenstock’s sales have been boosted of late by the blockbuster Barbie movie, which stars Margot Robbie in the title role donning a pair of pink Birkenstocks in one scene.

The company’s IPO comes more than two years after L Catterton and Arnault’s family investment company acquired a majority stake in the business at a valuation of about €4 billion. Since then, Birkenstock has been investing heavily in building out its production sites in Germany, including a new €120 million factory in Pasewalk, a town north of Berlin.

Nikhil Thukral, managing partner at L Catterton, said in an interview before trading opened that the firm is in no hurry to exit Birkenstock. The footwear maker has done well through previous tumultuous periods, he said.

“Although the last two weekends have been incredibly unsettling, we have lived through similar periods in the last couple of years – a pandemic, the war in Ukraine – and business performance has been unaffected by those issues,” Thukral said. “What is a great brand? You find out in markets like this, if you have something extraordinary.”