The online cosmetics retailer, Adore Beauty, is set to go public on the Australian Stock Exchange in the coming weeks so we thought this would be the perfect opportunity to explore this process in Tilly Money – to shed some light on how it all works!
We spoke to the founder of Adore Beauty, Kate Morris on the Tilly Money podcast recently when there were rumours of the company going public. Kate was unable to speak directly to the process at the time but she did share some information about the company structure and the presence of their business partners, Quadrant Private Equity, who have a large stake in the business.
So what does it all mean? If a company is private, it is owned by private individuals or businesses whereas taking a company public means you are listing the company on the Australian Stock Exchange. This allows the public to have access to buy shares in the company through their brokers or trading accounts. By selling off shares in the business, this can create a boost to the cashflow and value of the business if everything performs well. If, for instance, the beauty industry took a large hit like President Trump banning beauty imports or an Australian regulator banning a key ingredient, this can negatively impact the business and in accordance, the public shareholders might react negatively. The shareholders might all start trying to sell off their shares at once which will make the share price of the company fall fast!
When Adore Beauty lodges its listing on the Australian Stock Exchange, this is called an IPO – an initial public offering. This indicates the first allotment of shares to the business that will be available on the stock exchange. The value of the shares is set, based on the forecasted revenue or value of the business. In the case of Adore Beauty, the investment banks have priced the stock value at 3.9 times the forecasted revenue, at $6.75 per share, taking the market value to $635m.
This IPO will be one of the biggest listing (value and price-wise) of 2020, so far. We will track the progress of this listing and keep you all up-to-date so you can learn to find opportunities or understand initial public offerings.
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