The City was left stunned today as shares in online white goods business AO.com soared over 40 per cent on its market debut, valuing the company as bigger than Argos-owner Home Retail and the same size as Dixons.
One analyst suggested the £1.2 billion valuation echoed the dot-com bubble, which saw overvalued technology companies spectacularly collapse after rapid rises in the early 2000s, while others questioned the company’s business model.
With the offer price of 285p already towards the top-end of expectations, shares initially soared above 410p, before easing back to 399p.
AO.com founder John Roberts took home £86 million pounds today from selling part of his stake in the business he started 14 years from a pub in Bolton, and the soaring share price leaves him with a paper fortune of £480 million from his remaining 28.6 per cent stake.
Finance director Steve Caunce holds a 13.6 per cent stake worth around £240 million.
“I don’t get it,” Freddie George, retail analyst at Cantor Fitzgerald, told the London Evening Standard. “The last time I saw something like this was in the internet boom in the 2000s. This is very much like that.”
“The stock market does have these sort of phases, with the technology companies going to unbelievable highs. I image US institutions are into this in a big way but with £370 million of [full-year] sales forecast... a £1.2 billion valuation doesn’t make sense.”
Kate Calvert, retail analyst at Investec, was also unconvinced by the valuation. “To me it is difficult to understand the valuation,” she said, adding: “By most conventional measures it is a very full valuation.”
Roberts (pictured) said he was “delighted that our initial public offering has been so well received by investors. They have understood our business model and our potential.”
AO.com has ambitions to grow overseas and wants to be the biggest online electricals goods retailer in Europe.
Dixons has already attempted to hit back against suggestions it is losing out to AO.com, telling analysts and investors last week that it is 3 per cent cheaper than online competitors, has a cheaper supply cost on deliveries, and pointed out that it does not reward customers who leave favourable reviews with vouchers, unlike AO.com.
AO.com is one of the first of a rush of retailers to join the stock market, with Poundland, Pets at Home, DFS, House of Fraser and boohoo.com all set to follow.