Camping goods retailer Kathmandu has become the second retailer in as many weeks to feel some backlash from nervous investors, with shares in its initial public offering priced at the lower end of the company’s indicative price range at just $1.70.
The company’s market value has now been placed at $340 million, but analysts said demand for shares was hampered by concerns about the retail sector and comments from former owner Jan Cameron regarding her intent to start a rival business.
Additionally, analysts have also suggested the two recent interest rate rises and yesterday’s drop in consumer confidence may have affected the IPO. White Funds Management portfolio manager Angus Gluskie told The Age Kathmandu’s float was too risky a venture for many investors.
The comments come after department store Myer embarked on an IPO last month and also encountered criticism that its share price, at $4.10, was at the lower end of its indicative range.
”In that area of the retail spectrum it always carries high risk,” Gluskie said. “We don’t particularly like that part of the market, and looking back at the history of it I think what concerned us was the founder of the business starting up, or is in the process of starting up, a competing business at a lower price point.”
Investors could have also been drawn away after Cameron said earlier this week she would be “steering clear” of the IPO, and that she would “absolutely not” be taking part.
But despite the criticism, chief executive Peter Halkett said the IPO was a success from the company’s perspective and investors were pleased with the company’s performance.
“We are delighted with the success of the offer, which will provide us with a high-quality share register,” Halkett said in a statement. “After the rigours of an extensive institutional roadshow, it is very satisfying to see so many of these investors on the share register.”
The company’s two owners, private equity firms Goldman Sachs JBWere and Quadrant Private Equity, will exit their stake in the business after moving control to retail and institutional shareholders.
“The additional available Kathmandu shares being applied towards satisfying excess demand from institutional and retail investors, is consistent with feedback received from investors who preferred a 100% private equity exit,” the company said.
The two companies purchased Kathmandu from Cameron in 2006 for about $225 million.
The IPO comes after sales increased from $133 million during 2006-07 to $176 million during 2008-09. The company said it also expects sales to grow to $197 million during the current financial year, while EBITDA is expected to grow from $35.9 million to $47 million this year.
Kathmandu shares are expected to begin trading on Friday 13 November.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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