Ocado shares take a tumble on debut

SHARES in online grocer Ocado slid seven per cent on their market debut, after the group lowered the price of its initial public offering by nearly a quarter to lure sceptical investors.
By The Newsroom
Published 22nd Jul 2010, 10:34 BST
Updated 22nd Jul 2010, 10:35 BST

Ocado shares closed last night at 167p, 13p below the 180p IPO price. On Tuesday, Ocado lowered the range for its flotation price to 180-200p from an initial 200-275p.

Chief executive Tim Steiner said the company is still undervalued. "People are missing some things about Ocado because they are looking in the rear view mirror at our historical performance. Things change in the future."

Mr Steiner blamed the falling share price on hedge funds.

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"I am not overly surprised a couple of hedge funds wanted to have a pop at the open. We will see where it is trading in 24 months' time," he said.

Mr Steiner said the IPO price was cut to ensure a higher quality book of investors likely to hold shares long term.

Amisha Chohan, an investment analyst at HB Markets, said: "Even at the revised valuation, the company is still overvalued and expensive. We would not be surprised to see hedge funds shorting the stock."

Mike Nicol, manager of the Merrion European Absolute Return long-short hedge fund, said the deal was reminiscent of the 1990s dot.com boom, characterised by early-stage listings of companies that had never turned a profit.

"It does seem a very early stage investment. I am not sure it should have been listed at this stage," he said.

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