Ocado hits back at critics
OCADO’S advisers reacted furiously last night to suggestions its £1bn flotation may be in trouble.
The firm spoke out against a number of high-profile fund managers it claims are attempting to undermine the pricing of its IPO.
The float, in which the grocery delivery firm hopes to raise £200m, appears to be on a knife edge after a string of analysts and fund managers have questioned the valuation.
Schroders’ Andy Brough became the latest City personality to question the price, saying the firm is worth less than half of its asking price.
But an Ocado adviser told City A.M.: “We won’t sit idly by and allow fund managers to talk the price down. This is what they are attempting to do. No doubt at all. The team is confident and in fine spirits and aware what is going on.”
Ocado also vehemently denied reports the firm could be in financial difficulty if the flotation is pulled.
A qualification in Ocado’s accounts appears to question whether the firm can remain a going concern without securing extra funds. The reports claim Ocado is particularly reliant on a £100m loan that is dependent on the float.
But a spokesman dismissed this as “ridiculous”, claiming the qualification is just an accounting technicality.
He said: “It is completely misleading to suggest that there is a funding issue at Ocado – the going concern qualification in our accounts is a technical issue which has been there consistently for the last nine years because of the rate of our growth over that period.
“The company doesn’t need to raise £200m, but it is choosing to do so to grow the business and build a second depot.
“It is ridiculous to suggest that we would not be able to continue in business if we did not do the IPO or if we did not raise the £200m.”
A source close to Ocado also said the firm is not worried by Amazon’s venture into grocery delivery, saying the move proves it is on the right track.
Ocado’s directors are almost a week into their charm offensive and are now understood to be flying to the US to try to convince wealthy investors there to take up the share offer.
Last week City A.M. revealed a detailed analysis by Collins Stewart subsidiary Quest suggested shares in Ocado should be valued at 46 per cent under the mid-point put forward in its prospectus.
Using complex modelling software the firm calculated Ocado would have to grow sales at 19 per cent a year for the next 10 years and sustain returns almost twice those of Tesco to justify its mid point valuation.