As Mytheresa gears up to go public, Wall Street is eyeing the financial future of the platform as it seeks to put the past — including Neiman Marcus’ bankruptcy — behind it.
In its regulatory filing, the Germany-based online luxury marketplace — a former unit of Neiman Marcus Group, which filed for Chapter 11 protection last May — announced plans for an initial public offering of 15.6 million American Depositary Shares, with a price of between $16 and $18 per share.
The IPO follows a relatively strong fiscal year for Mytheresa: In 2020, the company surpassed 486,000 active customers, generated 449.5 million euros (or $547 million) in sales and shipped more than 1.09 million orders to 133 countries. While the luxury market has certainly taken a hit amid the COVID-19 health crisis, experts suggest that Mytheresa’s business model could prove resilient even in post-pandemic times.
Speaking with FN, Taleeb Noormohamed, CEO of online deals marketplace Jane and former chief growth officer at luxury platform Farfetch, suggested that the acceleration of digital adoption has only boosted Mytheresa while simultaneously hurting its brick-and-mortar luxury rivals. He also praised the company’s CEO, who joined Mytheresa in 2015 from eBay Enterprises, where he was VP of the Europe and Asia-Pacific regions.
“Mytheresa is a well-run organization with a strong CEO; Michael Kliger knows what he’s doing and has managed to keep his focus on growing Mytheresa despite all the noise related to Neiman Marcus’ own challenges,” Noormohamed explained. “If anything, a strong business model, a smart team and an ability to be successful under particularly challenging circumstances are good indicators [and] reasons to buy.”
In its prospectus, Mytheresa announced that it would use most of the money raised in its initial public offering to repay debt stemming from bankruptcy proceedings for its former parent firm, Neiman Marcus Group Ltd. LLC. (MyTheresa intends to use up to $206.4 million out of the $236.5 million in estimated net proceeds, assuming a price of $17 per share.)
According to experts, companies often use IPO proceeds to pay off creditors or stakeholders like venture capitalists, banks or even buyout firms. “It’s not unusual for some IPOs, particularly buyout-backed companies, to use a lot or all of the proceeds from an IPO to reduce debt,” said Jay Ritter, a University of Florida finance professor who studies IPOs. “As with all companies, investors are looking forward and valuing the company based on its growth and future earnings prospects.”
The remaining proceeds of the IPO, which come in at around $30.1 million, noted Mytheresa, will be used for working capital and other “general corporate purposes.” It plans to repay the remainder of the shareholder loans, if any, out of the net proceeds of one or more equity offerings in the future.
Experts say that in such IPOs, where a company is using the bulk of its proceeds to shed debt, investors will look at the firm’s plan of action to help determine whether it will have the financial means to act on its business strategies when it goes public — as well as the likelihood that it will continue to grow in a given economic environment.
“Investors look at the leverage of debt before investing,” said Jane Hali, CEO of retail investment research firm Jane Hali & Associates. “With debt, there is less revenue to invest in strategic initiatives; some of the revenue must go to paying off debt.”
Mytheresa has applied to have its shares listed on the New York Stock Exchange under the symbol “MYTE.” It’s not the only fashion brand hatching plans for an IPO this year: Poshmark, Dr. Martens and ThredUp are also seeking to capitalize on the booming stock market.