Amer Sports, the Finnish athletic company known for its popular brands such as Wilson and Arc’teryx, recently made its debut on the public markets. However, the initial public offering (IPO) failed to generate much excitement as its shares only rose by 3%. This lackluster performance can be attributed to the fact that the IPO was priced at a discount. While the stock opened at $13.40 per share on the New York Stock Exchange, it closed at the same price.
Amer Sports had originally planned to offer 100 million shares at a price range of $16 to $18 each. However, due to the underwhelming market sentiment and the reluctance of the Federal Reserve to cut rates, the company decided to lower its IPO price to $13 per share. As a result, Amer’s valuation dropped from a previously estimated $8.7 billion to approximately $6.3 billion. This significant decrease in valuation reflects investors’ lack of confidence in the company’s growth prospects.
On its debut day, only 2.5 million shares of Amer Sports were traded. This low trading volume is a clear indication of the limited interest from the sell-side. Typically, bookrunners would aim to open with around 10% of the total shares, which would be about 10 million shares in this case. The fact that Amer’s IPO failed to generate significant trading activity suggests that there is little excitement surrounding the company’s stock.
A Resilient Consumer Base
Despite the underwhelming IPO, Amer Sports’ finance chief, Andrew Page, remains optimistic about the company’s prospects. He believes that their target consumers have remained loyal to their brands and have continued to choose their products. Page attributes this resilience to Amer’s focus on delivering quality, innovation, and newness in their products. He emphasizes that the company’s long-term strategy is not solely dependent on its stock performance but on executing their vision of creating the best products in their respective categories.
Financial Challenges and Growth Initiatives
While Amer Sports operates some of the most renowned brands in the athletic industry, the company faces financial challenges. It carries $2.1 billion in debt and has not posted any profits between 2020 and September 2023. However, the IPO proceeds will be used to improve Amer’s balance sheet and fund growth initiatives, particularly for its brands Wilson, Arc’teryx, and Salomon.
Concerns About China
Investors have expressed concerns about Amer Sports’ ties to China and its reliance on the region. The company’s business in China has been steadily growing, reaching 19.4% of total sales in the nine months ending September 30. However, escalating tensions between the US and Beijing have raised uncertainty among investors. Many companies are actively seeking to diversify their market share to reduce their exposure to disruptions in the region. In response, CEO James Zheng emphasized the importance for sporting goods companies to establish a strong presence in China. While China is an essential part of Amer’s business, North America and Europe remain its biggest markets, representing 40% and 32% of business, respectively.
Amer Sports’ IPO debut may not have met investors’ expectations, with the stock only experiencing a marginal increase. The discounted price, low trading volume, and concerns about China have all contributed to the muted response. However, the company remains focused on its long-term strategy, emphasizing the resilience of its consumer base and the potential for growth in untapped markets. With the IPO proceeds, Amer aims to address its financial challenges and invest in its renowned brands. Only time will tell if the company can overcome these obstacles and generate solid returns for its shareholders.