Amer Sports, the Finnish athletic company known for its popular brands like Wilson and Arc’teryx, had a lackluster debut on the public markets. The company’s shares only rose by 3% after pricing its initial public offering (IPO) at a discount. The stock opened at $13.40 a share on the New York Stock Exchange and closed at the same price. While the offering raised $1.37 billion, Amer Sports’ market capitalization was estimated to be around $6.49 billion based on the closing share price and the number of outstanding shares.
The disappointing performance of Amer Sports’ IPO can be attributed to various factors, including the company’s decision to price its shares at a discount and the cautious stance of the Federal Reserve regarding interest rate cuts. The discount in the IPO price was likely a response to market sentiment influenced by Federal Reserve Chair Jerome Powell’s statement about withholding rate cuts. This cautious stance cast a shadow over the market sentiment and the struggling IPO market.
Amer Sports’ debut saw only 2.5 million shares traded, which is considerably low for an offering of 105 million shares. Typically, bookrunners aim to open with around 10% of shares, which would have been around 10 million shares in Amer’s case. This lack of sell-side interest reflects the tepid response to the IPO and highlights the challenges faced by the company in attracting investors.
The recent debuts in the IPO market, including that of German shoemaker Birkenstock, have failed to make a significant impact and have left investors unimpressed. The overall demand in the consumer discretionary sector has also declined. However, Amer Sports’ finance chief, Andrew Page, remains optimistic about the company’s market potential. He emphasized that Amer Sports focuses on delivering the best products in their category and that their target consumers appreciate their commitment to quality, innovation, and newness.
Despite being the company behind successful athletic brands, Amer Sports struggles with a hefty amount of debt, amounting to $2.1 billion. Another concerning aspect is that the company did not post any profits between 2020 and September 2023, according to a securities filing. However, Amer Sports did witness growth in revenue during the nine months ending in September 2023. The company generated $3.05 billion in revenue during this period, compared to $2.35 billion in the same period the previous year. However, it also suffered a net loss of $113.9 million, which was higher than the $104.4 million loss in the year-ago period.
Amer Sports aims to utilize the proceeds from the IPO to improve its balance sheet and fund growth initiatives for its brands like Wilson, Arc’teryx, and Salomon. There is particular room for growth in North America, especially for Arc’teryx, as the brand has low unaided brand awareness in the region. The company’s CEO, James Zheng, recognizes the importance of building a strong footprint in China, where Amer Sports has experienced significant growth. However, the company acknowledges that China is just a part of its larger business picture, as North America represents 40% of its market and Europe represents 32%.
Concerns and Future Outlook
Investors have expressed concerns about Amer Sports’ reliance on the Chinese market and its potential vulnerability to geopolitical tensions between the U.S. and China. To mitigate this risk, many companies are diversifying their market share to minimize disruptions in the region. Amer Sports’ business in China has been steadily growing, with Greater China accounting for 8.3% of its business in 2020, which increased to 14.8% in 2022. During the nine months ending September 30, 2023, 19.4% of the company’s sales came from the Chinese market.
Nevertheless, CEO James Zheng reassured investors that Amer Sports’ focus is on building a strong presence in China, which has already yielded fruitful results. However, the company is well aware that China is just one piece of the puzzle, as it continues to prioritize its established markets in North America and Europe.
Amer Sports’ IPO had a disappointing debut, with its shares rising only by 3% and the number of shares traded remaining significantly low. The company faces challenges in terms of its financial position, debt burden, and lack of profitability in recent years. However, Amer Sports remains optimistic about its future prospects, seeking to improve its balance sheet and capitalize on growth opportunities in North America, Europe, and China. The company’s focus on delivering innovative and high-quality products to its target consumers gives hope for a successful turnaround in the future.
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