Can ESG determine the destiny of IPOs and Investors?
Synopsis: Allbirds, an American maker of footwear, filed for an initial public offering in the United States on August 31, 2021. The company uses natural fabrics and is a “public benefit corporation” under Delaware company law. That means it is required to balance the interests of shareholders with those of other stakeholders. Sustainability is its major pitch and in the IPO filing, Allbirds states that it hopes to help pioneer a framework to conduct the first-ever “sustainable public equity offering”. Of course, not everyone is fully convinced about its sustainability or ESG credentials. While the profitability is under the scanner, there are also serious questions on the governance standards of the company. But most importantly, what should be the takeaway from other such recent cases? With the rising popularity of ESG and sustainability themes in investment management, there have been other companies that have highlighted these credentials while marketing their IPOs. For example, the Honest Company, whose founder is the popular Hollywood actress Jessica Alba, claims that it sells natural and environmentally friendly products. The company claims that it actively avoids more than 2,500 chemicals. A few months ago, the company had an Initial Public Offering, which was fairly successful. But post listing, the stock price performance has been disappointing. There are also reports that the company has been accused of misleading people by failing to disclose essential details about sales. Similar is the story of Oatly Group AB, a Swedish food company that produces alternatives to dairy products from oats. Although the stock price performance is not as bad as Honest, it is still disappointing considering what was expected of the company by the investors. EMAlpha believes that it is never enough to focus just on official or company-reported information for a holistic ESG analysis. And this applies to the recent IPOs as well.
The Covid-19 Induced Global Chip Shortage
When Covid-19 hit the world in early 2020, a pall of gloom hung over the global economy and uncertainty ruled the day. The future was pretty much unchartered and countries and companies around the globe started swinging in the dark. The current chip shortage is the result of the unexpected ways in which the global industries’ demand has played out for the chips.
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