Friday 4 June 2021 2:26 pm

Exclusive: Why the post-Covid investment space is ripe for a wave of retail IPOs

With over 450 IPOs already listed this year, including the likes of Moonpig and Dr Martens, the post-Covid market seems ripe for fresh floats.

Large retail companies are no exception and will be part of the recovery conversation. “

In fact, market interest in retail is steadily returning following a slow recovery after the pandemic, which has boosted confidence in the retail market.

Nevertheless, Maxim Manturov, head of investment research at Freedom Finance Europe, does think new market conditions do require a rethink.

“During the pandemic the retail industry was drastically altered resulting in many retailers migrating online. While this move to online was a leap of faith for retailers, it led to rapid growth among a plethora of retail organisations,” Manturov told City A.M.

“As a result of this success, more online retailers are likely to join the stock market to monetize their progress as the end of the pandemic could slow individual company’s growth, lowering the value and the potential to raise additional capital on the placing,” he added.

Manturov singled out Honest, a company producing children’s cosmetics and household goods and positioning itself as a pure and wholesome brand.

The company recently listed on the Nasdaq, becoming one of the first ‘celebrity stocks’ to go public.

ThredUp is another good example, according to Manturov. The online used clothing marketplace, went public at the end of March and is currently trading at a 29 per cent increase to the initial IPO price.

“This signals a steady return of consumer interest in the business,” he said.

Considerations to go public

Manturov stressed it is vital for these retailers to understand the advantages and disadvantages of going public.

“The main benefit of a retailer entering the stock exchange will be the capital raised for the company’s further development and, in general, entering the organised and liquid capital markets; in the future, it will help a company raise capital for further development quickly,” he said.

Also, the stock placement itself can be a “major” advertisement for the company, Manturov continued, adding that among the risks are lawsuits or bad reviews, which can negatively affect the company’s stock price.

“Finally, it’s important retailers make the right decision when choosing what stock market to trade on, from AIM to LSE, the choice is a difficult one to make.”

“Generally, the best choice for investing is the US exchanges, specifically NASDAQ, which became the leader in the number of placements in 2020, raising approximately $57.3bn,” he concluded.