Coty IPO gets off to a slow start for investors
Since the shares started trading last Thursday, the value has fallen approximately 0.7 percent, closing on the New York Stock Exchange yesterday at $17.39, although they did open up for trading $17.61, recovering from similar modest losses last Friday.
Investment experts have mostly aired caution over the stock, with the suggestion that in comparison to some of the other big players such as L’Oreal and Estee Lauder, the short- to medium returns on investment maybe limited.
According to market investment research group Seeking Alpha, the advice appears to be wait and see what moves Coty make next.
“Despite the lack of a first-day jump, shares offer no great appeal both in absolute valuation terms, as well as in comparison to some of its competitors. Investors should stay on the sidelines for now,” Seeking Alpha stated in an investor note.
Coty funds get a big boost
Last week the IPO raised around $1 billion for Coty after the Reimman family, which still holds a majority stake in the business, sold 57.1 million shares at $17.50 each, after initially offering them at a price range between $16.50 to $18.50 a share
Although Coty has been growing revenues in double-digit figures in recent years, in the past few quarters Coty’s financial results have softened, mainly on account of its lack of exposure to emerging markets, particularly in the Asia Pacific region, fuelling speculation that the business needs to make major acquisition to ensure future growth.
Big on fragrance, room for further investment in skin care
The company is largely known for its fragrance portfolio, and is currently ranked as the second largest fragrance player in the world, with brands such as adidas, Calvin Klein and Playboy.
It has been expanding into the skin care segment in recent years, but it is in the emerging markets, where skin care sales have been fast expanding that its portfolio is most lacking.
In the skin care market it has a considerable exposure to the mass market, but in contrast its fragrance portfolio is more focused on the prestige market.
Its portfolio structure gives experts good reason to believe that the IPO may add to an already considerable war chest which could be used to invest in a business with considerable exposure in the emerging markets, and particularly in the premium skin care segment.
