Birkenstock shares fell 13% on the first day of trading after what was reportedly a red-hot IPO

Birkenstock plunged 12.6% after the sandal maker raised $1.48 billion on the stock market, a debut that could cool the nascent recovery in prices.

According to data compiled by Bloomberg, the German company’s debut is the worst first-day result for a U.S. exchange with volume of $1 billion or more in more than two years. Of more than 300 U.S. IPOs of this size over the past century, only 13 have performed worse, the last of which was AppLovin Corp., which closed 18.5% below its IPO price in April 2021, the data shows.

In a fourth major test of the U.S. market in a month, shares of the German shoe maker opened trading at $41 a share on Wednesday 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 around 32 million shares on Tuesday.

Shares closed at $40.20 in New York trading, giving the company a market value of $7.55 billion. Including shares reserved for officers, directors and employees, the company has a diluted value of approximately $8.15 billion.

“Strong first-day gains earlier in the year likely attracted some ‘hot money’ into a number of recent IPOs, allowing them to rise in price,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital. “But aftermarket buyers have been hit with IPOs on multiple occasions now, so it’s no surprise that they eventually threw in the towel and refused to pay this time.”

The company sold 10.8 million shares while L Catterton offered 21.5 million. The buyout company and its subsidiaries will continue to own approximately 83% of the shares 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 trade on the New York Stock Exchange under the symbol BIRK.

Mixed performances

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

Arm shares have gained a modest 7.2% from its IPO price, while Instacart is trading 17% below its offering price. Klaviyo was the best performer, but even after rising 22.5% in its stock market debut, its IPO investors saw a 12% return.

The mixed performance of these three and now Birkenstock is sharpening the focus on the question of whether dozens of startups eyeing the public market will decide to move on or keep waiting. Those companies include a diverse range of companies such as activewear brand Vuori Inc., weight-loss drug maker Carmot Therapeutics and GameChange Solar, whose backers include a subsidiary of Koch Industries, Bloomberg News reported.

For Birkenstock, Triton last week postponed a planned share sale in German gear maker Renk AG after the global stock market collapsed. On Wednesday, French software company Planisware postponed its initial public offering on Euronext Paris, citing difficult market conditions.

Birkenstock profitable

Unlike many of the potential IPO candidates, Birkenstock is profitable. The successor company posted net profits of 103 million euros ($109 million) on sales of 1.12 billion euros in the nine months ended June 30, compared with 129 million euros on sales of 925 million euros in the same period his documents for the previous year.

Birkenstock plans to use the proceeds from the offering to pay down debt.

The family holding company of billionaire LVMH chairman Bernard Arnault, which has already invested in Birkenstock, was expected to buy shares worth up to $325 million as part of the IPO. Norwegian sovereign wealth fund and T. Rowe Price Group Inc. veteran Henry Ellenbogen’s Durable Capital Partners LP had expressed interest in buying shares totaling up to $300 million, according to filings.

According to the documents, up to 8% of the shares listed on the stock exchange at the IPO price are reserved for employees.

Fashion collaborations

Founded nearly 250 years ago, Birkenstock’s sandals have been sold in the United States since 1966 and are now 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 producing variants of labels such as Celine and Givenchy.

Birkenstock sales have been boosted recently by the blockbuster Barbie film, in which Margot Robbie, in the title role, wears a pair of pink Birkenstocks in one scene. This has increased the brand’s cross-generational appeal, with Millennials accounting for 31% and Baby Boomers accounting for 30% of sales.

The company’s IPO comes more than two years after L. Catterton and Arnault’s family investment company acquired a majority stake in the company, valued at around €4 billion. Since then, Birkenstock has invested heavily in expanding its production sites in Germany, including a new 120 million euro factory in Pasewalk, a city north of Berlin.

Two other shoe manufacturers have not fared well since going public in 2021. Shares of Zurich shoe maker On Running, which only became profitable last year, have gained 2.8% since the IPO, while Allbirds Inc. S shares, which sold for $15 in the IPO, are now selling for about $94 Cents traded and losses are expected to continue to rise.

Nikhil Thukral, managing partner at L Catterton, said in an interview before trading began that the company was in no hurry to exit Birkenstock. The shoe maker has done well in previous turbulent times, he said.

“Although the last two weekends have been incredibly worrying, we have experienced similar periods in recent years – a pandemic, the war in Ukraine – and business performance has not been affected by these issues,” Thukral said. “What is a great brand? Markets like this are where you find out if you have something extraordinary.”