There's more evidence today that AO World's much-touted IPO was overvalued. The white goods retailer issued a profit warning less than three weeks ago and this morning it seems its own chairman doesn't have the confidence its share price will bounce back any time soon.
Richard Rose, who has been on the board since way back in 2007, has dumped 89% of his shares for £10m. The sale valued the shares at 180p each, a fair way below the 285p they were issued at when AO made its stock market debut last February.
If Rose had sold the 5,583,475 shares he offloaded at the higher price, he would have made another £6m. It seems Rose doesn’t expect them to reach those dizzying heights again any time soon. The sale represents 1.3% of AO’s total shares, and leaves Rose with a stake of just 0.17%.
Of course AO’s PR machine was set to full spin cycle this morning. Its founder and CEO John Roberts insisted that Rose remains ‘committed to the company,’ adding that the sale will ‘help to further increase liquidity and the number of shares in public hands.’
True, but it’s probably safe to say that’s not the reason he did it. The sell-off certainly doesn’t look good for the company, and investors weren’t impressed – AO’s share price tanked another 4% to 184p this morning.
It’s not the first sign AO’s floatation was overhyped. Last month Roberts admitted publicity around the IPO was responsible for a big surge in sales last spring – something the company has failed to replicate this year.
Now the chairman's sold most of his stake, it doesn't look like we'll be seeing much growth in the share price anytime soon. Of course that's not to say that the company itself isn't trading perfectly well, just that the burden of expectations may have been a bit too great.