Can Ocado Deliver 2010 IPO?

Speculation that Ocado, the online retailing company which distributes Waitrose goods, may float next year are a bit premature.
The company, which specialises in grocery products bought online and delivered to the customer’s door, has seen year-on-year weekly sales growth up by as much as 30 per cent this spring, but it has not yet come into profitability.
Previously, Ocado’s masters have eschewed the idea of floating on the stock market, but press reports say they have been encouraged by other online company floatations and that has started the rumour-mill grinding.
This is against the background of the latest IMRG Capgemini eRetail Sales Index which recorded the worst levels of monthly growth in internet shopping since it began, at 8 per cent for last May. Not a very encouraging sign to prospective investors.
What the rumours about a possible Ocado float say more about is the media’s eagerness for a high-profile floatation to signal a return to economic prosperity.
Certainly, if current forecasts come true and the UK starts to see an upswing in productivity by 2010, investors will be looking around for businesses with potential to invest in.
A float by Ocado could also signal a swing back for retail into the arms of the stock market after many years of increasing private investment.
Other internet retailers would watch an Ocado IPO with great interest, as pundits have claimed online shopping has now come of age. A successful float by the company would vindicate that claim.
However the prospects of such a move can’t be backed up by reports Ocado’s board being encouraged by another online company float. There has to be more concrete evidence, like a balance sheet in the black.
It’s doubtful the stock markets have forgotten the dotcom madness of the beginning of the decade. Online companies, even those with eminent sponsors like JLP, will still be viewed with suspicion, unless they can demonstrate solid roadmaps for profit growth.