Ocado, the British online grocer, has cut the price of their initial public offering (IPO) by almost a quarter. Someone close to the company said it had cut the price range to get a higher quality group of investors. The price reduction of 180 pence a share would give Ocado a market value prior to fundraising of 720 million pounds, a value still above analyst’s estimate of 500 million.
“In the circumstances, I don’t think they can be too unhappy,” Arden Partner’s analyst Nick Bubb said.
“I’m sure they will feel slightly humiliated at having to cut the price… but at least it should ensure a more orderly after-market,” he said, referring to the possibility of stock value fall if it is priced to high at IPO.
Customers who subscribed for the purchase of shares in the previous range of 200-275 will be able to withdraw their order.
The firm plans on increasing their capacity in its existing distribution warehouse as well as building a second warehouse.
The current economic environment is a difficult one in which to float an IPO. Companies like NewLook and Fairfield Energy have postponed theirs. While others like Supergroup and Jupiter have succeeded in their IPOs.