My Food Bag shares list at a discount

MANY firsttime investors in My Food Bag were left disappointed yesterday as the stock fell after listing on the NZX amid high expectations.

The shares opened trading at $1.76, down 5% on the initial public offer price of $1.85, and fell further to $1.69 by 2pm.

The company had sold 184.9 million shares to institutional and retail investors in an IPO that was oversubscribed, meaning some investors had their allocations scaled back.

Ed Glennie, investment strategist at Hobson Wealth, said he was surprised to see My Food Bag’s share price open lower.

He said it would be disappointing for those who had already invested in the company, but those buying shares yesterday might see it as great value depending on where the share price settled.

‘‘It does show that people were more sceptical about the growth prospects than what we thought coming into this. If you’re the NZX and the sellers you’ll be a bit disappointed because you wanted day 1 investors to perform well,’’ Mr Glennie said.

‘‘There were too many expectations of a quick, easy day1 profit and that just hasn’t materialised. There were too many people thinking that [the stock] would do really well because it is My Food Bag. You’ve got the Sharesies phenomenon, a lot of retail engagement and interest, but they may not necessarily be longterm holders.’’

There were many sellers yesterday morning, Mr Glennie said.

The sharemarket had been a bit weaker over the past twothree weeks, which was not helped by lockdown, so that could be a possible reason for the lower price, he said.

My Food Bag had been pondering a sharemarket float for about three years, but began working in earnest towards listing midlast year.

Last year My Food Bag made a profit of $8.2 million and had revenue of $153.3 million.

It forecasts revenue rising to $189.5 million this year and dipping slightly to $186.4 million in 2022. The company expects net profit of $800,000 this year, to be adjusted on a pro forma basis to $15.6 million and rising to $20.1 million in 2022.

Most of the $342 million in IPO proceeds went to existing shareholders selling down their holdings, including private equity firm Waterman capital and the cofounders.

About $55 million raised will be used to repay bank debt and fund the IPO costs.

All existing shareholders have entered into escrow arrangements where they have agreed not to sell down their remaining shares until the date My Food Bag announces its result for the March 2022 financial year.

The investment document showed My Food Bag had been able to pay a regular dividend to its shareholders since 2018. It paid out $3.4 million in that year, $3.6 million in 2019 and $8.4 million last year.

The company will pay out $13.3 million to those existing shareholders in the year to March 31.

The majority of shares have been bought by New Zealand investors, but there has been solid support from selected offshore institutional investors as well. — The New Zealand Herald