Business

Investors beat the pandemic trend

When Bark, Inc — then known as the Original Bark Company — launched on the stock market through a $1.6 billion merger with a white-check company in June, its shares were already trading. rose 7.5% and its chief executive raised the price.

“There are 63 million households in the US [with dogs] and we’re at 1.8 million,” said Manish Jones, chief executive officer of the group, which distributes monthly subscription-based treat and toy boxes called BarkBox. It currently offers a selection of Spider-Man themes.

Since the listing, however, Bark’s stock has fallen more than 65% — and it’s not alone. After a record year for IPOs globally, a host of newly-listed prominent consumer companies have found their share prices low as the market falters over growth prospects. surname.

Lean oat milk brand, in-house agribusiness AppHarvest, ethical egg maker Vital Farms, kids and beauty brand Honest company and British e-commerce group THG have both listed in the past 18 months and are all trading at least 50% below their list price, despite a steady rise in the S&P 500 index. All but London-listed THG are traded on US markets.

Plant-based convenience food manufacturer Tattooed Chef has merged with a special purpose acquisition company, or Space – a device also used by AppHarvest – in October 2020 and its stock has since dropped more than 40%. The smaller UK-based Revolution Beauty has lost almost a third of its market value since listing in July.

Jamie Isenwater, founding partner of consumer-focused fund manager Ash Park Capital, says stock prices fall with either losing business or only narrow groups of profitable consumers joining in. market.

As VCs spawned a flurry of tech unicorns, cash quickly poured into privately owned or early-stage consumer companies, including from emerging investors. known for their technology holdings. For example, PayPal co-founder Peter Thiel invested in AppHarvest in 2020, according to Dealroom.

Several groups are listed amid a wave of enthusiasm for pandemic-era trends, from pet care to convenience foods, subscription models and an e-commerce boom. Many are seen as disrupters of existing industries but may only have vague plans for long-term profitability, said Isenwater, who added that he has stopped investing in any real estate, says Isenwater. any recent listings.

“[The falling share prices] certainly the market is scrutinizing some of these businesses harder than it used to,” he said.

There are company-specific reasons investors are frustrated with certain new publics. THG’s shares plunge in October after short sellers questioned the merits of its white-label e-commerce proposition, Ingenuity and an investor day were seen as an attempt to re-establish negative comments. extremely counterproductive.

OFast and AppHarvest both suffered from supply chain issues, which resulted in cuts to expected margins – an issue specific to AppHarvest, which operates in the notoriously narrow margin sector. .

But Will Hayllar, managing partner at strategic consultants OC&C, said there are bigger questions about whether proposals that seem appealing to IPO investors are actually a good fit for a public offering. significantly wide or not.

“The real questions to ask are how scalable is this proposal and how quickly can it scale? What is being offered to many people in relation to how much? ” he say.

“Sometimes the danger is that it seems like the perfect solution. . . urban city dwellers are affluent and that probably reflects those in the financial services industry who are directing IPOs. But does that work for more representative populations around the world? ”

There are also question marks surrounding the ability of companies like Oedly and Tattooed Chef to compete long-term with multinational food conglomerates, which can deploy billions of dollars in marketing budgets. and frequently acquires smaller companies in the fashion product sector.

80%

Discounts on shares of the Parsley Box meal subscription business

Isenwater said the threat to consumer multinationals from startups “has been massively blown away” – though he thinks Oedly is one of the few smaller companies that has cause real disruption to an age-old consumer market.

“Consumer staples lack the ‘network effect’,” he said, “while there’s also no chance to create giant semi-monopoly companies modeled after Amazon, Google or Facebook.”

“Investors have adopted a mindset that may be true in the tech world but isn’t really true in the food and beverage world,” said Mark Lynch, partner at business consulting outlet Oghma Partners. branded.”

Regarding plant-based foods, for example, he argues: “Without a lot of technological knowledge in these products, and generally speaking, it is quite difficult to protect yourself against anyone else. like Nestlé or whoever if they turn their attention to the market. ”

Isenwater admits that some loss management teams turn out to be “great businesses.” And not all recent consumer lists have fallen. Olaplex Hair Care Group, which debuted on the Nasdaq exchange in September, is trading 9% above list price. But that group has been profitable, reporting net income of $39 million on revenue of $282 million in 2020.

For some groups, proving a post-pandemic business model is another challenge, after Covid-19 restrictions prompted groups to cater to domestic consumers. Bark’s second-quarter results were lower than expected, for reasons including increased customer acquisition costs and higher abandonment rates among subscribers due to “the increased volume of customers we acquired during Covid last year.” leap”.

Parsley Box, a meal subscription business that listed on London’s junior market in April, has since lost more than 80% of its market value. Convenience makers like Tattooed Chef, also seen as a winner of the pandemic, face similar pressures.

With the intention of showing investors it’s more than just a novelty or pandemic game, Bark is branching out into dog dental care and tailored pet food. Regarding the latest results, Jones said: “There’s a lot of interesting things happening at Bark.”

Source link

news7h

News7h: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button