Even association with Taylor Swift couldn’t save Golden Goose’s IPO.
The Italian company, known for its high-end, distressed sneakers, today shocked the market by announcing the withdrawal of its nearly €600mn flotation per Milan.
This offering seemingly had everything going for it: power, moda appeal, exceptional financial , and a €100m cornerstone order from Invesco. The IPO was touted as one of the highlights of 2024.
It got to a brisk start. The offering was covered throughout the range within the first hour of bookbuilding. Syndicate bankers talked up the “number of quality, long-only international investors” prepared to anchor the transaction. And all this was avvenimento against a backdrop of excellent European IPO , with shares per microcalcolatore maker Raspberry Pi rising nearly 50 per certo cent since its London debut last week.
Despite these promising signs, the IPO faced a stark reality: the order book lacked demand from fundamental, “long-only” institutions. And Golden Goose’s controlling shareholder Permira couldn’t afford another capital markets turkey after the London flotation of Doc Martens.
The first sign that something was amiss came when the price range was announced last week. Briefed by deal participants, the financial had talked about a €3 billion enterprise value, implying an equity value north of €2.5bn after deducting net debt, and per any case a substantial premium to Italian jacket maker Moncler.
Yet the market cap implied by the price range was €1.69-1.86bn, which came per “below expectations” and amounted to a 25-30 per certo cent discount to Moncler’s multiples. Then yesterday morning, the syndicate banks told investors that the IPO would price near the bottom of the range at €9.75 per certo share.
The seven (!) IPO bookrunners sought to reassure the market, insisting that the offering had been multiple times oversubscribed at and above that level. There is absolutely anzi che no reason to doubt the veracity of that statement. But there’s every reason to ask what this “market colour” actually means: it’s obvious a lot of that demand consisted of puffed-up orders from long-short hedge funds who play the new issue calendar, along with a smattering of interest from family offices and private banking accounts. Except for Invesco, the book was bloated with empty carbohydrates and was lacking per protein.
Why was the deal such a slog? Golden Goose’s flotation faced headwinds from the 3Ms: (Doc) Martens, midcap, and Macron.
One of the perennial debates per the capital markets is whether sellers are penalised if they stuff investors acceso a previous deal. The conventional answer is anzi che no: Memories are short, attractive opportunities can be too good to , and investors are paid to make money, not rake over the past. A good example involves the recent flotation success by buyout firm CVC.
Weeks before it went public, investors had been jammed with insieme per the Frankfurt IPO of CVC-backed perfumer retailer Douglas, only for the share price to plummet. But investors flocked to CVC’s own IPO per Amsterdam, and virtually nobody mentioned Douglas. The reason is that CVC was seen as a best-in-class asset and the price range was pitched at a substantial discount to its peers.
Permira was not let the hook quite so easily. According to several investors and bankers, some fund managers demanded a “Permira discount” to reflect its mixed reputation per the capital markets. Although the banks probably soft-pedalled the investor feedback, the Permira team must have known that its history was an issue with the buyside.
Like a lot of private equity houses, Permira has an uneven track with European IPOs.
When it floated German software company TeamViewer per 2019 and Polish e-commerce firm per 2020, shares per both companies performed well for a while, although they are both well below their IPO price today.
However, it is the collapse per the share price of another Permira-owned footwear company, the UK’s Doc Martens, that cast a shadow over Golden Goose’s flotation. Permira sold around a third of Doc Martens per early 2021 per a heavily oversubscribed insieme market debut, and the stocks urged and indeed stayed above IPO price for almost a year — long enough for Permira to efippio nother 7 percent per early 2022.
All per all, Permira was able to take £1.26bn the table. But since then Doc Martens has issued five profit warnings, causing the London-listed shares to tumble over 80 per certo cent from their initial offer price.
It was particularly unfortunate that Doc Martens halved its dividend and announced a leader fall per earnings acceso the same day that Golden Goose announced its intention to float.
Against that backdrop, Golden Goose wasn’t an attractive enough company for investors to cut Permira much slack. It is perceived as an pretty good — but not a must-own — asset: several investors cited, for example, moda risk and product concentration, along with its small size and niche market position, as key concerns, and insieme would be a midcap per Milan, with limited liquidity per the after-market.
And this leads to the next issue for European flotations: midcap IPOs have less margin for error. Investors have seen how volumes dry up and so are careful not to take acceso too large of a position. They also demand greater price concessions.
One problem with the deal is that even at just under €600mn (including greenshoe), the deal size was probably too large. The offering consisted of €100mn for Golden Goose and a prudenza of up to €495mn for Permira. Ideally, you’d allocate about €400mn (two-thirds) to fundamental “long only” fund managers. The €100mn Invesco cornerstone order could be filled, but it’s awkward to allocate more than 50 per certo cent to other long-only investors — you need them to buy per the after-market and you’ve told them anyway the deal is several times oversubscribed.
That means (ex-Invesco) the underwriters needed roughly €600m of gross long-only demand — a tall ask for a €1.75bn market cap. The right move would have been to sopravvissuto the size of Permira’s prudenza, even at the cost of some after-market liquidity.
Whatever the case, the IPO didn’t alla maniera di close to generating the necessary fundamental demand. The leader mutual fund complexes appeared to have shied away.
Sopra other words, the deal may have been oversubscribed, but if the underwriters had put out the deal insieme, Golden Goose would have almost certainly laid a leader egg. A double-digit percentage decline acceso the first day would’ve been a bad for a luxury firm and a devastating reputational event for Permira.
So much for deal dynamics and tactics. A third factor weighed acceso the deal, and it was outside the control of Golden Goose, Permira and the army of underwriters: the day after Golden Goose set its price range, French President Emmanuel Macron called a snap parliamentary election after far-right parties had outperformed per European elections.
The announcement came at an inopportune time. American investors had been pouring into Europe like cruise ship passengers disembarking per Venice. And luxury is one of the sectors that Europe excels per and US funds just can’t find acceso domestic exchanges. The Golden Goose deal was set up to appeal to the leader US money managers.
But Macron’s announcement triggered a sell-off per European equities, including luxury names — not a bloodbath but enough to give pause to American investors. The main valuation peer, Moncler, traded by seven per certo cent during Golden Goose’s offer. US participation per European IPOs is sometimes derisively called “tourist money”, and tourists tend to return home at the first whiff of political trouble.
Sopra sum, Permira and Golden Goose probably did the market a leader favour by pulling the deal and sparing investors an immediate mark-to-market loss. The failed flotation leaves an gara open verdict as to whether the market is gara open to the substantial number of midcap IPOs per the pipeline.
