Baby Ace: Shares in boohoo.com jump by 60% on stock market debut

Friday, March 14, 2014

Shares in boohoo.com jump by 60% on stock market debut

By

Adrian Lowery

An online fashion retailer based in Burnley has become the latest stock market sensation in London after its stock soared 50 per cent on its first day of trading, netting its founders a gain of £125m in a matter of minutes, and taking their total estimated wealth to £600m.

Shares in the firm – which targets 16-24 year olds with its

own ranges of clothing, shoes and accessories – soared a stupendous 70 per cent on the AIM market from the 50p float price to 85p,

before settling back at around 75p. That gives the firm, which made pre-tax profits of £3.2m last year, a value of around £850million.

Last week, the Kamanis from

Manchester who set up Boohoo.com became one of the richest families in the

country after selling a £240m stake. Their remaining 44

per cent stake in the business ballooned today from being worth about

£250m to something in the region of £375m.

The next Asos? Boohoo targets 16-24 year olds with its own ranges of clothing, shoes and accessories

Boohoo.com is set to attract the tag

of the new ASOS, the fashion retailer that survived launching amid the dotcom bubble in 2001 and whose shares languished at low levels for years before soaring in recent years to £65 each, taking its market capitalisation to £5.8bn.

It joins a stock market frenzy for online

retailers and ecommerce that has seen valuations race dizzyingly higher than

profitability.

Its listing comes in the same week that

trading began in two other UK retailers – Pets at Home and Poundland –

and follows the float last month of AO World, the online white goods portal whose shares spiked 44 per cent on their London debut.

Most of the firms, including messaging

service WhatsApp, have managed to rack up sky-high valuations, raising

fears of a new dotcom bubble.

But Jasper Lawler, market analyst at CMC

Markets, said that unlike many of the dot-com era companies, Boohoo.com

makes money and that is keen to emulate the success of ASOS, its biggest

competitor.

Stock market float: Shares in Boohoo opened 70 per cent above its 50 pence offer price at 85p

He adds:

‘The question is whether Boohoo’s fashion-conscious 16 to 24-year-old

audience will offer enough revenue-growth potential to match the likes

of ASOS. Youth fashion tastes are fickle and subject to change. Take a

look at the once-popular Abercrombie Fitch in the US suffering

multi-year sales declines.

‘Boohoo.com has built a growing fan base which it has converted into

stellar earnings growth. In a buoyant IPO market where discount

retailers are order of the day, BOO may not be that scary at all.’

The company’s floatation raised £300million by placing 600million shares at 50p. It said some £240million will be used to

repay convertible loan notes held by existing shareholders, while around £50million to accelerate the firm’s expansion plans and boost working capital.

Around 55 per cent of Boohoo’s stock is on the public market after the float.

Popular: Founded in 2006 by joint chief executives Mahmud Kamani and Carol Kane, Boohoo now has 2.3million active customers

Founded in 2006 by joint chief executives

Mahmud Kamani and Carol Kane, the firm has 2.3million active

customers. Sales rose 70 per cent to £91.9million in the ten months to December 31,

while underlying earnings were up 188 per cent to £10.1million.

Ms Kane, who started her career as a designer then fashion buyer, has

worked with Mr Kamani for the past 20 years supplying high street

retailers.

Among the retailers to have launched on the London Stock Exchange recently as companies take advantage of the improving UK economy, chains Poundland and Pets at Home were the latest on Wednesday.

Poundland delivered a chunky 19 per cent premium to its investors in early trading, rising to 356.13p by mid morning from the float price of 300p, increasing its market value to nearly £900million from an initial £750million. But Pets at Home, which was valued at £1.2billion, dipped 4 per cent to 236.25p from its offer level of 245p.

Another dot-com bubble? Boohoo is the latest among a raft of social media sites and online portals to have floated on the stock market

Online appliance retailer AO.com last month smashed expectations for its stock market debut with a 33 per cent rise that increased the worth of founder John Roberts by £113million in less than nine hours of trading.

AO raised a total of £423million, initially valuing the company at £1.2billion, but the rise in its share price meant it ended the day worth £1.6billion, nearly as much as rival Dixons.

BM, the UK bargain chain chaired by

former Tesco boss Sir Terry Leahy, is expected to join the queue, with a

listing thought possible as soon as June.