The poor debut — with a market capitalisation of $168 million on listing — saw the Kogan (ASX:KGN) share price drop from $1.80 to just $1.58 cents, a fall of 12.2%, in the first 40 minutes of trading.
The debut has some market analysts questioning whether the company was overly hyped pre-listing, and why the oversubscribed stock, at the lower share price, wasn’t snapped up by institutional investors who took up the IPO offer.
The online discounter’s market debut follows an IPO last month, which raised $50 million, and was four times oversubscribed, with institutional investors taking up 30% of the business at $1.80 a share.
But, despite the drop in the value of his own shareholding, Kogan says the business is “fundamentally very strong”, and he still remains confident of the forecasts in the company’s prospectus.
When the IPO launched, Kogan, and chief operating officer and chief financial officer David Shafer (19%), together retained 69.2% of the company.
In its prospectus for the first half 2015/2016, Kogan forecast a drop in earnings from $2.6 million to $2.4 million, mainly becausse of higher warehousing costs and higher volumes of aged inventory. Revenue for 2016/17 was forecast at $241 million with pre-tax earnings of $6.9 million.
The chairman of Kogan, Greg Ridder, said in the prospectus the board and management were excited about Kogan’s “strong growth prospects”, in particular with Kogan Travel and Kogan Mobile, which were launched in 2015.
And, Ridder said integration of the Dick Smith online assets — not reflected in the forecasts in the prospectus — would add 1.3 million members to the company’s existing database of approximately 2.3 million email subscribers.
“Management is focused on the opportunity to invest further in Kogan.com’s core strengths, through expanding its highest-margin product ranges, supported by targeted marketing investment to maximise traffic, conversion and frequency of purchase.
“The board believes these initiatives will position Kogan.com to deliver strong growth and operating leverage for many years to come,” Ridder said.