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Flotation could value Ocado at £1.1bn

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Ocado could be valued at £1.1bn when it floats on the London Stock Exchange later this year.

Figures released this morning by the company show the online grocer is looking to join the market at a share price of between 270p and 275p. If realised, this would put a value on the company of between £800m and £1.1bn before flotation and realise a value at flotation of £1.18bn. The valuation would make the company immediately eligible for the FTSE250.

The share offer, announced at the end of last month, is currently open only to institutions, who must state their interest by July 20, and to employees and customers, who must apply by the end of July 18. Customers must have spent more than £300 since January in order to qualify. The first day of trading in Ocado shares could be as early as July 21.

Our view: Critics of this flotation have pointed out that Ocado has yet to make a profit – something raised again today by analysts questioning its £1bn price tag. The company, on the other hand, has pointed to earnings before interest, tax, depreciation and amortisation growing by 181% a year.

So in the end the question comes down to potential – and faith. Do investors believe strongly enough in the Ocado brand to trust that the share price will soar when the stock hits the market later on this month?

So far it’s only really people in the Ocado heartland of the south east who’ve had the chance to judge whether this brand is as good as its media profile. But as the £200m expected to be raised in the flotation is invested into the business, it will expand further afield. Then the rest of us will be able to judge whether Ocado’s fabled top-notch service is worth the money – and whether people outside of middle-class London are willing to pay for that.

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