Zalando SE shares gave up most of their early gain on the online apparel retailer’s trading debut in Frankfurt, providing a modest opening to the biggest week in German technology stock sales in a decade.
The shares were up 0.5% at 21.61 euros at 4:13 p.m. in Frankfurt after rising as much as 14% earlier. The most recent trading valued the Berlin-based company at about 5.3 billion euros ($6.7 billion).
The performance contrasts with the 38% first-day gain in shares of Alibaba Group Holding Ltd. (BABA) last month after the online retailer had the biggest initial public offering of all time. After pricing the shares near the top end of the range, Zalando is holding near its IPO price, similar to what Facebook Inc. shares did on their trading debut in May 2012 before losing half their value in the following months.
“They have to avoid a Facebook disaster,” said Christian Schulze, an assistant marketing professor at the Frankfurt School of Finance & Management. “It seems to have gone moderately well.”
Rocket Internet (RKET), another company backed by Germany’s Samwer brothers, will start trading tomorrow after an IPO. Zalando, which sells clothes from Adidas soccer jerseys to designer dresses, priced its IPO near the top end of its range, raising 605 million euros by selling as much as 11% of the share capital.
Zalando’s offering is one of Germany’s most significant e-commerce IPOs to date as investors seek to capitalize on the expanding sector. Revenue from online shopping in the country is expected to grow 22% this year and 16% next year to $73.5 billion—the fastest of the five biggest European Union countries, according to researcher eMarketer.
“Zalando is a European online retailer and not a pure German one,” said Schulze, who has studied e-commerce companies and product returns.
Rocket, which replicates businesses from Groupon Inc. (GRPN) to Airbnb Inc., increased the amount it’s seeking to raise in its IPO to 1.4 billion euros, a figure that would make it the biggest share sale in Germany this year. The Samwers, the Berlin entrepreneurs who control startup investor Rocket and founded Zalando in 2008, have sought to make Rocket into an e-commerce powerhouse in emerging markets in Asia, the Middle East and Africa.
Companies raised $64.3 billion in the third quarter, data compiled by Bloomberg show. Tele Columbus AG, Germany’s third-largest cable operator, said yesterday it plans to raise at least 300 million euros in an IPO.
This week’s Zalando and Rocket IPOs could also spark demand for offerings among other European tech companies, some of which have been languishing in a difficult IPO landscape.
Zalando “shares feel cheap right now,” said Bjorn Gustafsson, an analyst at Kepler Cheuvreux in Stockholm who covers Sweden’s Investment AB Kinnevik (KINVB), an investor in Zalando. Europe’s few publicly traded online retailers include Asos Plc and Yoox SpA. The lack of investment opportunities in the segment increases demand for Zalando, he said.
Other investors in Zalando include the Samwer brothers’ Global Founders fund and billionaires Anders Holch Povlsen of Denmark and Yuri Milner of Russia.
The company posted profit before interest and taxes of 31.5 million euros in the second quarter on sales of 546 million euros. Zalando had 2 billion euros in sales for the 12 months ended in June. The company gets more than half its revenue from Germany, Austria and Switzerland.