US IPO Weekly Winners & Losers

Birkenstock (NYSE: BIRK) buyers hoping for a quick flip instead got a flop. The German sandal maker raised $1.5 billion but closed the week down 21% in one of the decade’s worst debuts for a billion-dollar deal.

A few weeks ago I called poor aftermarket returns an “autocorrect feature” of the IPO market. This week we saw it in action. Until now, getting an allocation on a big IPO meant a first-day pop. But after getting burned on multiple deals, aftermarket buyers didn’t show up this time.

Valuation was also a sticking point, since the $46 offer price put Birkenstock at the top of its peer group on forward P/E. The company has great fundamentals, but investors need to see it execute to get that kind of elite multiple.

The hot money is gone, but there’s still plenty of investor demand for solid companies at reasonable prices. It's not the new normal, it’s the old normal (pre-2020).

In terms of deal flow, it's clear we haven't turned the corner yet. Weak companies can’t go public, and strong companies want valuations they can't get. That valuation disconnect looked to be fading, but Birkenstock tells us we still have a ways to go.

Against a backdrop of IPO turbulence, wars abroad, and a bond market meltdown, many IPO hopefuls have soured on Q4, but we’re not counting out the quarter just yet.

The IPO market slid -1.6% this week, vs a +0.4% gain for the S&P 500. Solar equipment company Shoals Technologies was the week’s IPO winner, up +6.1%. Israeli assisted-driving play Mobileye sold off -16.7% around uncertainty over the war.