Amer Sports, the parent company to Arc’teryx, Salomon Sports and Wilson Sporting Goods, among other outdoor and sports lifestyle brands, came up short of its expectations for the pricing on its initial public offering (IPO).

The IPO sold 105 million ordinary shares at a public offering price of $13.00 per share, falling far short of the expected price range of $16.00 to $18.00. The company did end up selling 5 million more shares than initially anticipated, but the total $1.365 billion raise for the IPO did not come close to the potential $1.6 billion to $2.0 billion expected based on the company’s range.

The IPO values Amer Sports at about $6.3 billion, a disappointing reality compared to the $8 billion to $10 billion estimates in the market.

Amer did grant the underwriters a 30-day option to purchase up to an additional 15,750,000 ordinary shares to cover over-allotments so another $205 million for a total of approximately $1.57 billion at the top end, again far short of the estimated $2.0 billion at the top end of the company’s plan.

Amer Sports shares are expected to begin trading on the New York Stock Exchange on February 1, 2024, under the symbol “AS”.

AS shares closed the day at $13.40 on Thursday, up 13.1 percent for the first day of trading. Shares were up 11.6 percent in day two of trading to close at $14.95 on Friday afternoon.

This is the second disappointing debut for an active lifestyle company since early October, when outdoor casual lifestyle footwear brand Birkenstock priced its IPO at $46 per share, slightly below the mid-range of its expectations. When the market opened on those shares, they did not start trading until mid-day, and when they did it was at $41 a share, roughly 11 percent lower than the IPO price. BIRK shares closed at $46.39 yesterday, down 2.3 percent for the day.

At the core of the concerns about the Amer Sports business appears to be analysts’ concerns with the close connection and over-reliance to its China business, driven in large part by Anta Sports, a Chinese retailer that acquired a 50 percent stake in Amer Sports in 2019.

Amer Sports generated 19.4 percent of its sales in China in the first nine months of 2023, up from 8.3 percent in 2022, based on financials submitted in its F-1 filing associated with the IPO. The majority of sales come from the Americas and Europe, and while revenue in these regions has been growing, sales in China were up by 68 percent in the first nine months of 2023 compared to the corresponding period in 2022.

Sources participating in the IPO told Reuters earlier on Wednesday that, despite this growth, some potential investors are concerned about Amer Sports’ fortunes being intertwined with China’s economy.

Arc’teryx appears to be particularly tied to the Anta Sports business in China, which operates brand stores for Amer Sports in the defined Greater China region. In that region alone Arc’teryx retail stores more than doubled their business in the first nine months of 2023, compared to the corresponding period in 2022. The $155.8 million in revenue from 36 stores ($4.32 million per door) in China accounted for 16.7 percent of total global revenues for Arc’teryx in the 2023 nine-month YTD period.

Comp-store sales growth for the Technical Apparel stores, which is mostly Arc’teryx, increased 70.3 percent in the nine-month YTD period in 2023, on top of 31.9 percent comp-store sales growth for the segment in the corresponding period in 2022.

The Technical Apparel segment for Amer Sports, which is primarily comprised of Arc’teryx, a darling of the premium outdoor specialty market in North America, generated 63 percent of its revenues through owned-retail in the nine-month YTD period in 2023, with Arc’terys’s 36 stores in Greater China accounting for nearly one-quarter of total DTC revenues.

Arc’teryx generated 43 percent of its overall global revenues in Greater China in the nine-month YTD period in 2023, while the region only generated 5 percent of sales for Salomon and Wilson Sporting Goods in that period.

Amer Sports said the the closing of the offering is expected to occur on February 5, 2024 subject to the satisfaction of customary closing conditions.

Goldman Sachs & Co. LLC, BofA Securities, J.P. Morgan, and Morgan Stanley are acting as joint book-running managers for the offering. Citigroup, UBS Investment Bank, Baird, BNP PARIBAS, CICC, CLSA, Evercore ISI, TD Cowen, Wells Fargo Securities, Deutsche Bank Securities, and HSBC are acting as bookrunners for the offering. Blaylock Van, LLC, Drexel Hamilton, Loop Capital Markets, Ramirez & Co., Inc., Siebert Williams Shank, and Tigress Financial Partners are acting as co-managers for the offering.

Image courtesy Arc’teryx