Ocado’s flotation far from certain

The long-rumoured flotation of online food retailer Ocado continues to rumble on and advisors are supposedly due to be hired after Easter.

The road to a stock market listing took an interesting turn with an article in the Sunday Telegraph that reported an unnamed analyst from an “expert retail analyst firm” had handed over a detailed research note highlighting the quality of the Ocado business and how it was misunderstood.

This individual chose not to disclose their identity because of the “sensitivity of the pre-float” period, which I take to mean they are probably involved in the float in some way or are in the process of getting involved. If this is true then they are on the sell-side of this deal and it’s therefore in their interest to sell the Ocado story.

Such an intervention highlights that this deal needs a lot more selling to institutional investors and the media. The fact that it is proving such a hard task convincing the latter of its merits leads me to believe that the former will hardly be rushing to commit to buying stock in the float.

The problem with Ocado is that this unnamed analyst is wrong – we do understand Ocado. We know it’s a superb business run by sharp operators who provide a superior service to their customers, but we also recognise that this does not necessarily make it a great long-term investment. Ocado has yet to convince many peope that its model of delivering groceries nationwide from dedicated warehouses can generate meaningful profits.