Dr Martens the British boot brand is planning to float on the London Stock exchange. The company which sells 11 million pairs of shoes has in last fiscal year had sales of £670 million and made profits of £101m.
A German Doctor created its famous 8 eyed lace boot with air cushioned sole, designed to strengthen your back. What was intended as a work boot became an iconic footwear for the punk skunk or hip woman usually with ring in nose and tattoo somewhere. The boot is a fashion item but now it seeks to counter the fashion cycle with a permanent presence on the London Market.
The Company once owned privately is now owned by the Investment Group Permira. They reckon the Company at its lower end value is £4 billion and they intend to sell arond 25% of their ownership raising say £1 billion. They bought the Company for £300 million 7 years ago. Thirteen times plus your money over 7 years, not bad I’d say or could anyone argue ?
The reality that I look at ( call me mad ) is that an Exchange in London is valuing a pair of shoes at approximately £363 per pair , the boot sells online for a quarter of that. Apply that fraction to the float value of £4 billion and sell 25% of that brings you back to common sense level of £1billion that is exactly what the pairs sell for. Permira meantime retain the 75% still valued at £3 billion ( they reckon ) and carry on their business from there. Now remind me what I said about air cushioned soles, did I not say hot air ?
Investors are being asked to fill their boots but I say kick it into touch. Great business for Permira but this stuff is walking on water , a miracle at best and an example of the bubbles created on those exchanges. Ok you’re going to tell me that the Investor is not buying a one of pair of shoes and they will receive an annual dividend but these flows are not sustainable and the Investment Groups are building numerous of these platforms hoping that they don’t all go wrong together one fine day.
Long story short the Company is worth , in my eyes, £1 billion not £4 billion. Big question remains then, would you rather own the boots or the shares. The boots are difficult to pull on the shares at the float price difficult to get out of at some point. As I write I wonder if the terminology. Is it called a float , hoping it won’t sink ?. Pie in the sky comes to mind. Congratulations Permira , you’re clever , an over three fold cashed in return and an ethereal £3 billion to play with. I’d definitely walk away from this one.
qbitblogger 