Online greeting card seller Moonpig Group has unveiled plans for an initial public offering (IPO) and floatation on the premium segment of the London Stock Exchange.
Announcing the intention to float on Tuesday morning, Moonpig said it is targeting a free float of at least 25% of its shares, saying the IPO is being considered to raise the profile of the group and provide it with a platform for “continued growth” and provide additional trading liquidity in the shares.
The company also reported that for the six months ended October 31, 2020 it achieved revenues of GBP155.9mln, up 135% year-on-year, adding that its business is also “highly cash generative” due to its “high margins, an attractive negative working capital profile and relatively low capital expenditure requirements”. The company also boasted a 12mln customer base and claimed to have a 60% chunk of the UK’s online greeting cards market.
“We are confident that Moonpig Group will continue to make gifting even more effortless for millions of people across the UK and internationally, and as the leaders of the accelerating shift to online now is the perfect time for us to bring the company to the public market”, chief executive Nickyl Raithatha said in a statement.
Moonpig’s chair, Kate Swann, added: “Moonpig Group combines strong and sustained growth with excellent cash generation, in a market which is underpenetrated and moving online. I have been impressed by the management team, their innovation, and by the customer insight provided by Moonpig Group’s data. The Board is confident that Moonpig Group is well positioned to capitalise on its first mover advantage in the online card market and continue its strong momentum in the gifting segment, benefit from the continued human need for connections, and cycle-resilient customer spend on gifts and cards.”
Moonpig’s IPO plans were initially reported last week as rumours swirled that it could be the first in a long line of expected flotations in 2021, achieving a valuation of as much as GBP1.5bn.
Other firms that have unveiled plans to float include iconic shoemaker Dr Martens, with owner Permira intended to sell a stake in the group.
IPOs could be a good sign but be cautious of market overheating, says analyst
AJ Bell investment director Russ Mould said that the announcement of the Moonpig and Dr Martens floatations in quick succession “could be a good sign” and suggested that “capital markets are working well and doing what they are supposed to do, which is provide capital that companies can use to invest and hire, create wealth and ultimately help the economy to grow.”
“Investors are also always intrigued by a new stock market entrant. [IPOs] can represent a chance to buy into a new, exciting story that generates capital gains or welcome income over the long-term, or at least make a quick turn if a deal looks like it is going to be hot and the shares are going to spike”, Mould said.
However, the analyst added that a “sudden torrent of new listings” could be a warning sign that the bull market may be on the verge of running out of cash, particularly with markets in the US showing “signs of an over-heated new offerings market, especially given the post-listing surges in names such as Airbnb and DoorDash, the torrent of new Special Purpose Acquisition Companies (SPACs) coming to market and the lofty valuations at which many new entrants have gone public”.
“The UK is showing no real signs of any of those, which is reassuring, although investors will also want to keep an eye on secondary offerings too, since they also soak up cash that could otherwise be deployed elsewhere…. investors do need to be on their guard in case the steady flow of new deals becomes a flood, especially if deal quality starts to flag and certain hot or popular sectors witness very high levels of activity”, Mould said.
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