Value in 60 Seconds: It is IPO season... again - 15 September 2023

It's looking like IPO season here again, not too different from what we saw a couple of years ago. This time the businesses are at least generating a little bit of profit, but the valuations remain really extended, whether you're looking at Arm, Maple Baron, Instacart, or Birkenstock. We're looking at expectations baked into these stock prices, highly unrealistic growth for Arm, maintaining best ever margins while growing revenues. For Carte, something very similar in terms of growing revenues and maintaining their best, maintaining best ever margins for over a decade, especially when their primary customers or partners, Kroger, Walmart, Target are competing directly with them. And then the Birkenstock IPO, at least a positive ROIC, a little bit of NOPAT there, but again, expectations are way too high. There's an avalanche of positivity around these IPOs because Wall Street makes a lot of money, tens of millions of dollars on each one of these transactions. So you can see where incentives drive behavior for sure in this part of the market.