Friday, 9 July 2010

Ocado, the Silly Season, and Finance 1.01

A man who likes his food (and his £££), Mr Quango was onto the oddities of the Ocado flotation like a flash. Since then, our friends at Alphaville have been all over it like a rash. August may be the official Silly Season, but evidently we’ve started early this year and the investment commentariat in general has been letting us understand, more or less subtly, that Ocado is an IPO that won’t fly at its chosen altitude.

I’ve been in the PE/VC game for a while, on both sides, and there are a number of cast-iron rules about financing pitches (or ‘decks’, as they are known, as in deck-of-ppt-slides):

- the total market they are attacking is always worth at least 1 billion (of whatever currency seems appropriate)
- “if we get even 1% of this market, that’s 10 million
- “we think we are unique”, etc etc

(The answer to this last assertion is of course: then you obviously don’t know how to use a search engine)

The killer is always the valuation. If you’ve ever watched Dragon’s Den, you’ll know that no budding entrepreneur ever values their leeedle company at less than 1 million (of whatever currency …). “I’m looking for £150,000, in return for 15% of the company”, it’s always the same. I have seen this myself so many times it is scarcely even droll any more.

Now Ocado is the baby of some ex Goldman’s types - the chutzpah is not in short supply. So they are going for full IPO; everything has been scaled up: and Lo! Ocado is worth £1 billion !

Or not. Do yer own DD … and be sure to read Alphaville. And Mr Q.



Bill Quango MP said...

In the related links on your link to the Alphaville piece is the conspiracy story that Ocado Critic, Philip Dorgan, is let Go By Broker.

A very highly respected retail analyst, he made the comment that the company “begins with an ‘o’, ends with an ‘o’ and is worth zero”.

{I so nearly printed that comment as its quite witty, but it rather undervalues Ocado so I left it out.
Just as well or I might have been ............

Anonymous said...

For sure this is a crock, new distribution center or not. Who are they kidding? I mean, we would have to be an obese, slovenly type of society to take up this kind of armchair indulgence? Maybe a buy for 20 years down the line?

I'm a gold bug myself and very happy. Looking to punt on the markets and waiting for BP to look attractive, but not yet. (you went in WAY too early city-un) This is one I would avoid like my mother in law.

James Higham said...

Ocado is an IPO that won’t fly at its chosen altitude.

That is so poetic that there's a tear in my eye.

Nick Drew said...

Thanks, James, we do our best

Am taking a breather from gold just now Anon, took profits @ 830 (Sterling), the current down-tick has a bit longer to run IMHO but may very well be back after any sustained interval below 770


personally I don't know how to call BP, except one morning we will wake up to find something dramatic has happened either way

looks like toss-of-a-coin to me

(there are of course options-plays to cater for this state of affairs but that's way beyond a Saturday-morning blog comment)

AntiCitizenOne said...

Ocado Price Cut Ahead Of Stock Market Listing