My Food Bag has reported a 5 percent profit increase in the most recent full year, but shareholders could be waiting a while for shares to return to their initial list price. Photo: RNZ
My Food Bag has reported a positive year in its latest update, but shareholders are being told they could have a long wait ahead of them for shares to return to their initial list price.
My Food Bag listed on the NZX in 2021, in what it said at the time would be the largest IPO by amount raised since 2014.
Shares were issued at $1.85 each, including to many customers. But the price dropped in initial trading and has largely continued to decline from there.
Shares were trading for 20c on Thursday afternoon, after chief executive Mark Winter told the market it had lifted its profit 5 percent in the most recent full year.
Greg Smith, head of retail at Devon Funds, said the prospect of the share price recovering to anything like its list price was "incredibly remote".
"It was a classic private equity exit, which has seen a lot of retail investors lose out. The stock was floated in peak conditions, as lockdowns were in force, and the idea of everyone ordering meal kits on a regular basis reinforcing the hype. The firm actually did deliver on its prospectus forecasts in the early days, but many investors extrapolated a situation that as we know now was only ephemeral," he said.
The bulk of the shares sold came from private equity firm Waterman Capital, with smaller parcels from founding shareholders Cecilia and James Robinson and Theresa Gattung.
"At under three times earnings (EBITDA) the stock seems very cheap, however investor confidence is pretty shot, and the question is how does the company deliver a sustainable earnings growth path?
"Consumer spending pressures will ease at some point, but it has tried to expand overseas and that didn't work, competition in NZ has also intensified. As management also notes they have 'right sized' the business so it would be hard to see the shares ever getting back to former glories."
Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene, agreed it would be tough.
"Never say never, although it's a long way off. There's no doubt that a lot has happened since they listed, including Covid, high food price inflation and rising interest rates. These factors have certainly hampered demand.
"However, with rates starting to fall and people beginning to feel the pressure come off, things might start to turn around for the company, [Thursday's] announcement is an encouraging sign in that direction."
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