Last week the oat milk company Oatly went public, pricing the IPO at a level yielding a market cap of ca 10bn dollars, then rising in the first few days quite a bit above that. In line with this post on IPOs and underlying company profitability, the IPO was very successful while the company is still unprofitable.
But what I wanted to reflect on is the following: in July 2020 Oatly announced an investment in its shares of 200m dollars by private equity and celebrity investors valuing the company ca 2 billion based on a reported ca 10% stake.
This blog is not about judging where an investment is good, bad, recommended or not recommended, it is just about thinking and reflecting to increase awareness, so the main question here for me is the following: what does
- an over 5-fold increase in valuation
- over a time span of less than one year (10 months – from July 2020 to May 2021)
- in a consumer goods company that is still unprofitable
say about what market participants (specifically IPO subscribers and post-IPO buyers) are focusing on?
What growth rates are people expecting and how realistic have they become? Let’s say that those who invested in July 2020 were actually investing their money – are those people paying 5-6 times as much after 10 months also investing or is it another type of activity? speculation? fashion? something else?