Why is Allbirds stock down 70% since its IPO?
Allbirds (NASDAQ: BIRD), the New Zealand footwear company, was listed on the Nasdaq in November 2021 at a starting price of US $21.21 and found a range between US $20 and $30 for one month.
Its mission to create the world's first carbon-neutral shoe brand appealed to investors, perhaps those of the ESG persuasion, who have pushed a record US $650 billion of funds into ESG project in 2021. As noted by the Financial Post, Allbirds mentioned the word "sustainability" 112 times in its IPO filing.
Starting December 2021, up to the time of writing, BIRD stock has plummeted to US $5.99, and its market cap has reduced to US $4 billion from US $900 million. While the company has been performing admirably, as per its quarterly report released on February 23, BIRD's stock price has flown south for the winter, as it's caught up in the same winddown experienced by many other of its growth stock brethren.
Over the past few months, investors have generally turned against growth stocks ever since it became apparent that the US Federal Reserve would be hiking interest rates to combat the countries inflation that is famously at a 40-year high.
Allbirds is firmly in the category of a growth stock and a unique growth stock at that, as its typically eco-conscious customers return less frequently to the Allbirds checkout aisle. This means its growth strategy and attempt to build brand awareness has to be particularly aggressive.
As such, Allbirds is ploughing its cash flow and cash reserves into gaining more customers, opening brick-and-mortar stores, and expanding its apparel range. The company is projecting revenue of US $360 million in the 2022 financial year, a big lift in revenue over 2021, but still expects to make a loss of approximately US $11 million. Interestingly, it should be noted that about US $8 million of this shortfall is attributed to compliance costs associated with becoming a public company.
Even though Allbirds may bootstrap its growth expenses with its cash flow and reserves, it does have US $40 million available under a revolving credit agreement. The cost of borrowing capital moving forward, should it need to meet its aggressive growth strategy, may become increasingly costly in line with the US Federal Reserve's interest rate hikes.
Its mission to create the world's first carbon-neutral shoe brand appealed to investors, perhaps those of the ESG persuasion, who have pushed a record US $650 billion of funds into ESG project in 2021. As noted by the Financial Post, Allbirds mentioned the word "sustainability" 112 times in its IPO filing.
Starting December 2021, up to the time of writing, BIRD stock has plummeted to US $5.99, and its market cap has reduced to US $4 billion from US $900 million. While the company has been performing admirably, as per its quarterly report released on February 23, BIRD's stock price has flown south for the winter, as it's caught up in the same winddown experienced by many other of its growth stock brethren.
Over the past few months, investors have generally turned against growth stocks ever since it became apparent that the US Federal Reserve would be hiking interest rates to combat the countries inflation that is famously at a 40-year high.
Allbirds is firmly in the category of a growth stock and a unique growth stock at that, as its typically eco-conscious customers return less frequently to the Allbirds checkout aisle. This means its growth strategy and attempt to build brand awareness has to be particularly aggressive.
As such, Allbirds is ploughing its cash flow and cash reserves into gaining more customers, opening brick-and-mortar stores, and expanding its apparel range. The company is projecting revenue of US $360 million in the 2022 financial year, a big lift in revenue over 2021, but still expects to make a loss of approximately US $11 million. Interestingly, it should be noted that about US $8 million of this shortfall is attributed to compliance costs associated with becoming a public company.
Even though Allbirds may bootstrap its growth expenses with its cash flow and reserves, it does have US $40 million available under a revolving credit agreement. The cost of borrowing capital moving forward, should it need to meet its aggressive growth strategy, may become increasingly costly in line with the US Federal Reserve's interest rate hikes.
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