Hey, Doubters of Michael Kors’ IPO: Eat Some Crow – But What a Price?
Sometimes IPOs do make little people rich, despite what all those social media faceplants testify to the contrary. The first day buyers of Michael Kors (KORS) – including those that bought in the open market on launch day, not just the insiders – have officially doubled their money in a mere eight months.
Michael Kors was a quite-hyped offering of a designer clothes and accessories seller in December. Unlike Facebook (FB), the company was profitable right through the recession and had, in fact, doubled annual earnings just before the launch. In a rough market, its underwriters priced the offering at $20 a share, which was higher than many thought was smart. Those same underwriters – Morgan Stanley (MS), Goldman Sachs Group (GS) and JPMorgan Chase (JPM) -- quickly attracted more criticism by announcing an unexpected secondary offering before the traditional lock-up period.
Of course, all that’s water under the bridge when you have a 110%-plus share price gain. Michael Kors just hit a $10 billion market cap, and Morgan Stanley and friends look like geniuses. (At least in retail underwriting. The trio also acted as underwriters in the Facebook debacle.) Industry analysts are still so hyped about the company that eight out of nine recommend buying Michael Kors shares even as they trade at over six times annual sales.
Filed under: Company Analysis