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Three takeaways from Allbirds IPO

By Angela Gonzalez-Rodriguez

8 Nov 2021

Business |ANALYSIS

Image: Allbirds' debut on Nasdaq

Allbirds was expected to raise up to 268.8 million dollars with a valuation of more than 2 billion dollars. Its market value was based on the 143 million shares expected to be outstanding once the deal closed. The comfortable, sustainable show brand however sold more shares than expected, setting for a market capitalization of 3.75 billion dollars.

Appealing to investors with focus on “profitable growth”

Allbirds sold more shares than planned due to high investor demand, with the shares jumping 93 percent above its offering price on the first day of trading.

Allbirds initially priced its shares between 12 and 14 dollars, with the fashion brand raising its IPO price to 15 per share shortly after hitting the trading floor for the first time. Remarkably, BIRD stock raised up to 30 dollars apiece the day it went public.

The company sold more than 20 million shares at 15 dollars each, raising 303 million dollars in aggregate proceeds. Allbirds’ chief financial officer Mike Bufano said investors were encouraged by recent improvements in the lossmaking company’s gross margins, which he said showed the company was “really focused on profitable growth”. Additionally, market sources point out that investors were also encouraged by the tech-driven business model.

Allbirds takes it back: No longer the first “sustainable” IPO

While Allbirds was all set to become the “first sustainable IPO” in the history of Wall Street, the San Francisco based shoemaker had to take it back soon after going public, following a market regulator’s objection. Allbirds dropped its claims to be the first “sustainable” IPO after the Securities and Exchange Commission objected, according to the group’s chief financial officer, reported the ‘Financial Times’.

Since the company announced in August that it would pursue a “sustainable public equity offering” that would guarantee the company met various environmental, sustainability and governance (ESG) standards, it has been cutting such claim in subsequent updates to its IPO prospectus.

A few weeks later, in the company’s revised S-1, Allbirds changed the term “Sustainable Public Equity Offering” to “Sustainable Principles and Objectives framework,” or SPO framework. It also removed references to such SPO framework by about half, and removed language about how Allbirds hoped its SPO framework would serve as a guide for other companies.

Allbirds’ CFO, Mike Bufano, said the company’s commitment to sustainability remained but said it had been pushed by regulators to change its prospectus. He declined to give details. “There’s lots of stuff that changes because you get feedback from different stakeholders, in this case the SEC, but . . . we believe [the framework] is still really useful for other companies,” he summed up. The SEC hasn’t made any comments in this regard for the time being.

Still… The market is hungry for sustainability-driven companies

The success of Albirds’ IPO is a sign that investors are putting their money behind sustainability-driven companies, point out market analysts in the retail space. Rent the Runway’s recent S-1, for example, documented the company’s sustainability benefits similarly to Albirds, although they didn’t make reference to an SPO framework. The fashion rental company successfully priced its initial offering at 21 dollars, at the high end of its 18 - 21 dollars per share estimated range.

“We did get exposure to a lot more pockets of capital as a result of the fact that people saw the genuine and authentic leadership that we’re putting forward on ESG,” said Co-founder and Co-CEO Joey Zwillinger in an interview on CNBC’s Squawk Box. “I think why the demand was so great…investors were really attracted by the opportunity to put their capital against great opportunity to create outcomes that were better for the planet.”

Image: Allbirds Nasdaq’s debut. Credits: Nasdaq