27 May HOW TO IPO IN THE CURRENT ENVIRONMENT; BE CAREFUL OF THOSE ‘BIG BETS’
Welcome to this week’s business and media intelligence update.
BE CAREFUL OF THOSE ‘BIG BETS’
Not quite 12 months ago, Ruslan Kogan, the always-colourful founder and CEO of Kogan.com, declared the pandemic represented a “once in a century” opportunity, as lockdowns led to a rampant rise in online shopping.
Fast forward (in a Kogan DVD player), to late last week, the company warned adjusted EBITDA would come in between $58 million and $63 million, well below market expectations of about $70 million. The news surprised investors, with the share price dropping by 13 per cent.
According to several media commentators, the profit downgrade was the result of the company’s strategy getting caught up in the founder’s hyperbole. Now, the online retailer is experiencing stretched supply chains and build-ups of inventory from betting on large sales continuing into the new year.
The Kogan announcement got our attention because it signals that volatility in the market remains an issue – and that companies making ‘big bets’ on market conditions will be punished if their predictions don’t come true.
So, as companies start to prepare for results season, here are some points to consider:
- The market continues to be dynamic – take a conservative approach to outlook statements and long-term predictions;
- Assess the key risks when developing your strategy’s messaging; and
- Ensure investor and media messaging are tightly aligned
HOW TO IPO IN THE CURRENT ENVIRONMENT
Pepper Money debuted on the ASX this week and was the latest company to fall victim to a tough IPO environment. It was supposed to be the biggest IPO of the year to date – with the company raising $500 million – but ended up being a disappointment. Shares in the non-bank lender closed 10 per cent below its issue price.
On the other side of the ledger, Cannings worked with DGL Group – a New Zealand-based company that manufactures, stores and distributes chemicals, on its dual listing on the ASX and NZX. Shares closed eight per cent higher on its first day of trading and continued to climb throughout the week.
Here are some tips for companies looking to IPO in the current environment:
- Communicate a unique market position;
- Carve out a business narrative to underpin messaging;
- Demonstrate strength in management team;
- Engage with media strategically, particularly on Listing Day; and
- Keep momentum post IPO
MEANWHILE AT BREAKFAST – MICHAEL SMITH
This week, we had AFR journalist Mike Smith join us for a round table breakfast to discuss his new book, The Last Correspondent: Dispatches from the Frontline of Xi’s New China. Mike shared his firsthand account of life on the ground in China, his experience being forced to flee the country last year, and his interviews with friends and key players in Chinese society. Mike also kindly agreed to answer a few questions for our On The Couch Podcast. Stay tuned for the release on our LinkedIn page.
Feel free to share these updates with colleagues or friends. They can sign up here to receive our daily newsletter.