After only 11 years in existence, On Running has joined other big players in the sporting goods market with its ONON ticker symbol in terms of stock market capitalization. Its parent company, On Holding, started trading on the New York Stock Exchange yesterday at $35 a share, 46 percent above the initial offering price of $24 announced the day before.
It closed the day at that same price of $35 yesterday, after hitting a record of $38 in the early afternoon. It opened this morning at $35.77, gaining speed in early morning trading. The offering price had been raised twice from a range to $18-20 and a range of $20-22.
At $35 a share, On is worth about $9.6 billion, largely the same as the valuation reached by Crocs a few days ago, after unveiling its ambitious plans to raise its annual turnover to $5 billion from $1.4 billion five years from now. The Swiss running shoe company is also worth more than Under Armour ($9.4bn) and Skechers ($7.1bn), and more than twice as one of its nearest competitors, Asics ($4.6bn). Coming after Nike ($250bn) and Adidas ($57.2bn), Puma is still a much more valuable brand at $17.7 billion, thanks largely to its high earnings.
Evidently, the market expects On to continue to grow very fast, generating much better results. It boasted a compound annual growth rate of 85 percent since its inception, reaching a level of 425.3 million Swiss francs (€396.7m-$465.8m) in 2020, and similar growth for the first six months of this year. The company, which has been in a strong investment mode, reported a 66 percent increase in its adjusted Ebitda to CHF 50 million ($45.8m-46.6m) for last year. In the six months through last June 30, it booked a generous gross margin of 59.3 percent and a net profit of CHF 3,759,000 (€3.50m-$4.12m) on sales of 315.4 million (€294.1m-$345.1m).
The company has made a good job at marketing its products with a notion of freshness and a strong message of sustainability, making ample use of e-commerce and social channels. It is breaking new ground with the Cyclon, the first fully recyclable shoe being sold with a subscription model.
On has already indicated that it wants to expand its apparel line and open more flagship stores, like the one it has in New York City, in key cities such as Berlin, London and Tokyo. It also wants to have a bigger presence in Asia, particularly in China, and in the important lifestyle segment of the market. Nearly half of its sales are now in the U.S. In Europe, where its strength lies mainly in the German-speaking countries, it still has strong opportunities for growth in countries such as France, Italy, Spain and the U.K. It will be interesting to see how it’s going to attack these markets.
Judging from the name of the Swiss-based parent company, On Holding, we also wonder whether its managers, who still control its voting shares, may be contemplating some acquisitions down the road. For example, they may want to try to apply its sustainable subscription model, which is being tested this year, to other companies and products.
The IPO has already generated proceeds of more than $746 million. Including overallotments, which have already been oversubscribed, On will rack up gross proceeds of more than $858 million. Early-stage investors, some of which reportedly sold some of their shares in the end, obviously made big gains through the IPO. Hillhouse Capital and other institutional investors preferred to keep them, in view of the expected appreciation of the stock. So did apparently the Swiss tennis champion Roger Federer, who took a minority stake in the company in November last year, positioning himself as brand ambassador.
Collectively, On’s three founders - David Allemann, Caspar Coppetti and Oliver Bernhard - and Martin Hoffmann and Marc Maurer, co-CEOs along with Coppetti, made an estimated $136 million by selling 5.66 million shares at $24 each. To celebrate the IPO, the five Musketeers joined a group of 100 people in a run along the Hudson River down to Wall Street, where they rang the opening bell of the stock exchange.
The closing of the offering is set to take place on Sept. 17, subject to the satisfaction of customary closing conditions. Goldman Sachs & Co., Morgan Stanley and J.P. Morgan are acting as joint lead book-running managers for the IPO, with Allen & Company, UBS Investment Bank and Credit Suisse acting as joint book-running managers. Baird, Stifel and the Telsey Advisory Group are acting as co-managers.
Photo: On Running
