Aritzia’s IPO saw trading open at $18.95 and close the day at $17.71, the next trading day was not much better closing even lower at $16.74. While this isn’t exactly the bullish trend that we expected to see out of the trading activity, we acknowledge that should not take away from the company’s prospects. Aritzia continues to be one of the fastest growing retailers in Canada and has many more retail locations to open before it reaches the market saturation that Lululemon has achieved. (Arguable whether Lululemon has reached market saturation) As documented in prior posts, we point to further confirmation of the Company’s bright future that the search trend for the term ‘Aritzia’ continues to increase suggesting that brand recognition is growing.
With the proceeds of the IPO going straight into the hands of investors, it may not be that much of a surprise that the share price has been traded down especially since the likelihood of existing private investors maintaining their ownership stake is slim. While some may look at this is a negative, we should all be aware that Private Equity firms such as Berkshire Partners often invest in companies with the overall goal of divestiture at some later date, whether this materializes through buyout or IPO. This is just part of the normal course of business and should not be a reflection of investors ‘jumping ship’.
Furthermore, comfort should be taken from the fact that the IPO was oversubscribed and that there is a real appetite amongst investors for new opportunities in the retail space. While the negative investment trend was not entirely expected, we do expect there to be some consolidation in the share price and presume that the price could turn around for the reasons mentioned above.