Amer Sports, the owner of Arc’teryx clothing brand, is expected to raise less than it hoped for in its largest US initial public offer since October. This is the latest indication that investors are cautious amid a tentative return in the market.
Two people familiar with the deal said that Amer has talked about selling shares at $13 per share when it price late on Wednesday. This is below their published target range between $16 and $18 per share. The company’s initial market cap would be $6.3bn at $13.
This would be the second large IPO to fall below its target price range this month, after KKR-owned BrightSpring Healthcare group last week.
It is expected that the company, which is majority owned by Anta Sports from China, will not confirm pricing until late Wednesday night, and it could still be subject to change. Bloomberg reported that Amer had been guiding investors to expect a price range below target.
A person involved in the Amer transaction said that both Amer and BrightSpring were affected by investor caution when it came to companies with high debt levels. BrightSpring’s stock was sold at a price that was more than 10% below its original range. Shares in the company fell another 15% on the first trading day.
Amer had loans outstanding of over $5.5bn by the end of September, 2023. In the first nine-months of 2023, it reported a loss of $114mn. The preferred adjusted measure for earnings before tax, depreciation, and amortization was $422mn during the same period. Amer intends to use proceeds from the IPO to reduce some debt.
Amer’s debut in the US listing market will still be a landmark despite the weakening demand. The IPO is expected to be the biggest fundraising since Birkenstock in October last year, and by a Chinese-owned company after the disastrous listing of Didi in 2021.
The stock market’s recovery and the expectation that the US Federal Reserve would soon begin cutting interest rates has raised hopes that IPO activity can finally pick up again after a two year slowdown. After putting their listing plans on hold, high-profile groups like social network Reddit are now talking to investors again.
Several bankers and traders stated that investors are still wary about backing companies with high debt levels and require substantial discounts in valuation to support such deals.
A senior IPO banker stated: “There have been discussions with [companies] and investors about how to get larger assets to the market. . . Get leverage up to a level that the public markets are happy with?”
Last week, Moody’s said that it expected Amer’s debt-to-ebitda to fall to four times or less after its IPO.
“Moody’s anticipates that Amer Sports will adopt a more conservative, transparent and accountable financial policy as it is a publicly traded company,” the report added.