Interactive Investor

New IPO unveiled – could it encourage others?

27th January 2021 15:26

Graeme Evans from interactive investor

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Battery and e-cigarette company to float on the AIM, while others wait in the wings.

Investors eyeing initial public offerings (IPOs) by Dr Martens and Moonpig have another stock market debut to mull over after e-cigarette and vaping business Supreme announced a listing on the Alternative Investment Market (AIM).

The Manchester-based business also distributes millions of batteries every year to retailers including B&M (LSE:BME) and Halfords (LSE:HFD). It has been valued at £156.1 million following the placing of shares with institutions before dealings on the junior market on Monday.

Next week will also see trading start in online greetings card business Moonpig at a valuation of between £1 billion and £1.2 billion, while investor roadshows have been taking place this week ahead of the much-anticipated £3.5 billion debut of shoemaker Dr Martens.

The flotations represent a turnaround in fortunes for the London market after Wall Street captured imaginations in 2020 with the IPOs of Airbnb (NASDAQ:ABNB), Snowflake (NYSE:SNOW) and Vroom (NASDAQ:VRM).

The highest-profile market debut in London was September's £5.4 billion arrival of Hut Group owner THG (LSE:THG), which has rocketed in value to £7.7 billion at one point in January. The shares were today 23.5p lower at 726.5p, valuing the tech-led consumer brands business at £7.3 billion.

With THG described by stock market bosses as a case study for tech in London, hopes are rising that the likes of Deliveroo, Darktrace, and Trustpilot will follow suit in the coming months.

The chances of fast-food delivery firm Deliveroo listing in London have just been boosted by Wall Street’s red-hot reception for the US equivalent DoorDash (NYSE:DASH) after its own IPO in December.

Cambridge and San Francisco-based Darktrace, which was the first to develop an AI system for cyber security, is thought to be working on plans for a £3.8 billion float. And business review platform Trustpilot is heading for unicorn status as a start-up valued at $1 billion (£730 million).

The Dr Martens debut will trigger huge windfalls for staff and value the stake of private equity firm Permira at more than £2.5 billion, compared with the €380 million (£337 million) it spent on the business in 2014.

Since then, sales have soared from £160 million in 2013 to £672 million last year as the company benefits from rapid investment in e-commerce and supply chain systems.

Moonpig, meanwhile, has harnessed data science and artificial intelligence to build a 60% market share of the online greetings card market. It is also private equity owned and has former WH Smith boss Kate Swann leading its board.

The Moonpig stock market debut on Wednesday is expected to raise at least £386 million, with shares priced in a range of 310p and 350p each.

The proceeds from the AIM debut of Supreme will be £67 million, the majority of which are going to selling shareholders including founder and chief executive Sandy Chadha. He will retain a substantial stake of 56.8% following the admission.

In the year to March, the company achieved underlying earnings of £16.2 million and revenues of £92 million from product categories spanning batteries, lighting, vaping, sports nutrition and wellness, and branded household consumer goods.

It has exclusive distribution agreements with big name household battery brands including Duracell and Eveready, and is also responsible for a significant proportion of the UK lighting market. Its 88Vape brand is one of the best known in the UK, while the company also has one of the largest e-liquid manufacturing facilities in the country.

Now a “profitable business of significant scale”, Chadha hopes the AIM listing will raise the company's profile and give it a platform to execute on its growth strategy. The directors intend to pay dividends to shareholders equivalent on an annual basis to 50% of net profits, starting with results for the six months to the end of September.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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