By Lina Saigol
Shares in Moonpig soared 29% within minutes of the company making its stock market debut in London on Tuesday, as investors rushed to tap into businesses that have thrived during the pandemic.
The online greetings-cards and gifts retailer priced shares in its initial public offering at 350 pence a share , giving the company a market capitalization of about £1.2 billion ($1.64 billion).
The flotation comprises 5.7 million new shares to raise gross proceeds of £20 million and 134.6 million existing shares being sold by certain existing shareholders — equating to a total offer size of £491.2 million. In total, they represent 41% of the greeting-cards retailer’s issued shared capital on admission.
Moonpig’s stock was trading 25% higher at 438 pence a share after floating in London trading on Tuesday.
The IPO is the second-largest U.K. listing so far this year, after Dr. Martens /zigman2/quotes/224328095/delayed UK:DOCS -0.30% made its market debut on the London Stock Exchange last week. The cult British boot and shoe maker saw its shares surge 22% in its debut session to value the company at £3.7 billion.
“This is an impressive start for a company that is likely to face challenges that have seen the likes of Paperchase and Card Factory /zigman2/quotes/201895510/delayed UK:CARD +2.83% struggle, although both of those businesses have much higher costs due to their store footprint,” said Michael Hewson, chief market analyst at CMC Markets U.K., in a research note to clients on Tuesday.
Paperchase in January filed a notice to appoint administrators from PwC to advise it on its insolvency process.
The surge in Moonpig’s share price will give encouragement to a raft of other companies considering stock market listings in Europe this year, to take advantage of a rebound in the equity capital markets, which have been buoyed by optimism over the rollout of COVID-19 vaccines .
These include takeaway-delivery firm Deliveroo , which was recently valued at more than £5 billion following a new fundraising round, Money-transfer startup Transferwise , and cybersecurity firm Darktrace .
Moonpig Chief Executive Nickyl Raithatha said that listing on the LSE will provide new opportunities for the business. “We are confident that Moonpig Group will continue to make gifting even more effortless for millions of people across the U.K. and internationally,” he said.
Owned by buyout group Exponent Private Equity, Moonpig has flourished during the pandemic, as people have turned to sending cards and gifts to friends and family to stay in touch during lockdowns.
The company, which operates in the Netherlands as Greetz, is seeking to position itself as a technology business, by using the data it collects on its customers to remind them of birthdays so that they spend more on gifts such as flowers.
“Moonpig has certainly seen a big increase in demand as a result of the pandemic, however its last set of accounts showed that revenues for the end of last year to April 30th increased to £173.1m. This was a rise of 44% on the previous year. It stands to reason that the revenues for this year should come in much higher, however whether that’s enough to justify a valuation of £500m remains to be seen,” noted CMC’s Hewson.
Unconditional trading of Moonpig shares will begin on Feb. 5.
Moonpig’s debut came on a buoyant day of London trading. The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.47% , the index of London’s top stocks by market capitalization, was 0.8% higher on Tuesday, while the mid-cap FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.73% rose close to 1%.
Stocks that are most sensitive to developments in the COVID-19 pandemic surged, including InterContinental Hotels Group /zigman2/quotes/202865596/delayed UK:IHG +0.45% and restaurant and hotel owner Whitbread /zigman2/quotes/207954631/delayed UK:WTB +0.97% .
“Optimism grows that the UK’s vaccination program will bring about an earlier easing of restrictions, which these particular brands will be able to take advantage of in the form of stay-at-home holidays,” said Michael Hewson, an analyst at CMC Markets.
British Airways owner IAG /zigman2/quotes/208070069/delayed UK:IAG +1.87% , which similarly reacts to developments in the pandemic, also rose in London trading.