Ocado forced to slash float price
OCADO caved in to investor pressure yesterday by slashing its IPO valuation by 20 per cent, in a desperate eleventh hour bid to keep the float alive.
Ocado’s management were accused of arrogance for failing to listen to analysts and investors who baulked at the initial £1.1bn price-tag attached to the business.
The online grocer insists the pricing of the institutional section of the IPO will go ahead today at a new range of 180-200p a share – down from 200-275p a share. The new range values Ocado at £720m-£800m, excluding the £200m it is still expected to raise from new investors today. Existing investors, including the John Lewis Pension Fund, will however have to settle for less for their stake.
The firm received an unprecedented level of hostility to its valuation, with a string of analysts saying it was worth as little as £400m.
Clive Black, head of research at Shore Capital, who has vocally criticised the valuation of the IPO, told City A.M.: “This is a massive blow to the reputation of Ocado as an investment product.
“We will have to wait and see if investors are willing to bite at the lower level. I think you have to seriously question the attitude of management throughout the entire process.
“It is our job to see investors make money and we just didn’t see any way they could make money at that valuation. It was a wholly unacceptable price. The firm may be a great idea and a great story but the price was fanciful.”
The retail portion of the float, which had already failed to attract anywhere near the level of interest the firm had hoped, will now be delayed until Friday to give investors a chance to back out of their commitment. Just three per cent of Ocado customers chose to take up the offer, raising £10m – well under the £50m the firm had hoped to bring in.
It is understood the firm’s banks had advised it not to go ahead with the retail aspect of the float.
A source close to Ocado said the firm has now allocated a higher percentage of the shares to top level investors. The firm will make an announcement this morning with the exact pricing of the flotation.
A spokesman said: “The pricing is closed. We’re very pleased we have got the flotation away.”