The least surprising event this week was the lowering of the price range for the flotation of Ocado to 180p-200p.
At Retailinsider.com we’ve long been sceptical about this whole IPO process at the initial £1 billion valuation. (See previous post in May)
The only real surprise is that the cut wasn’t greater – from its original ludicrously optimistic 200p-275p – but what can now be expected is that the ultimate price the float gets away at is at the bottom end of this new range.
There has been pretty much a unanimous view in recent days within the City that the valuation was way too rich. Even the public (its customers) have shown little interest in picking up the shares at its high valuation. They will pay a premium for Ocado groceries and they equally expect to enjoy a premium from the shares.
The only positive voices were a contrarian Telegraph journalist and those on the payroll of Ocado. And many people were, including seven sets of bankers employed for the IPO exercise.
The positive spin employed seemed to revolve largely around US investors and those in Amsterdam recognising the business more as a technology stock than a grocery business. Such organisations command a higher valuation.
If cannny US investors, who know their technology stocks way better than any investors in the UK, had successfully been hoodwinked by this sales strategy then I’d have been stunned. The inevitable price cut has clearly shown they were not fooled one iota.
To their credit, Ocado management have fought a good fight but have had to bow to the inevitable. If they had managed to squeeze the IPO through at their original valuation via some sympathetic/soft investors (I’m sure they exist) then the price was sure to have tanked in the after market.
At least at the lower price its shares might have some decent support when they hit the market.