Ocado flotation consigned to bargain basement

By RUPERT STEINER FOR THE DAILY MAIL
Updated: 11:25 EST, 21 July 2010

Online grocer Ocado last night bowed to overwhelming market pressure and slashed the price of its embattled flotation by a fifth yesterday.

The company had hoped its shares would fetch between 200p and 275p. But it was forced to drop the price to between 180p and 200p after a lukewarm response from investors.

The loss-making firm had filled around 80pc of its order book by Monday night but there were concerns whether it would manage to rake in the balance. 

Priced to clear: Ocado has been forced to downgrade it's flotation price

Institutional investors were asked to commit to the shares they wanted to purchase by close of play yesterday and it is understood that the firm now has all the orders it needs – but only after dropping the price.

The climbdown is a major humiliation for the retailer, which had been struggling to justify a pre-float valuation of between £800m and £1.1bn.

Priced to clear

Executives had embarked on a 10-day international road¬show aimed at drumming up support in the US but were on the back foot after a number of analysts slammed its sky-high valuation.

One investor who placed an unspecified order gave a muted response to the offer saying it was only worth a punt as a ‘long shot’.

Josef Schuster, a fund manager based in Chicago, told the Mail: ‘The odds are against Ocado.

‘I have invested because it could be a long shot that defies the odds and does better than expected in medium to long term.’

The new range would give Ocado a pre-IPO market value of about £720m if it sells shares at only 180p.

That is still well above some analysts’ estimates, which have valued the company at no more £500m.

It is raising £200m to expand an existing distribution centre and build a new one in the Midlands, and a further £200m to pay for long-standing investors to sell their stakes in the business

Ocado had earmarked around 15pc of the stock for retail investors, aimed at rais¬ing £50m. But just 3pc exercised the option to invest by Sunday’s deadline, raising just £10m.

In an effort to drum up more orders from its loyal army of shoppers Ocado is extending this deadline to Friday and is sending emails to customers overnight with details of the new pricing.