Amer Sports IPO Preview

• The biggest risk for Amer Sports is its excessive leverage. It had net debt of $5.9 billion and equity of only $8.8 million at the end of 3Q 2023.

• Many investors are likely to emphasize the negatives more (especially the excessive leverage and inconsistent operating margins), rather than the positives such as China representing increasing percentage of total sales.

• Amer Sports is trying to raise nearly $1 billion in this IPO which could value the company at about $10 billion.

Conclusion First

Amer Sports is trying to raise nearly $1 billion in this IPO which could value the company at about $10 billion. The company has excellent global sports and outdoor brands including Arc’teryx, Salomon, Wilson, Atomic and Peak Performance. The company achieved sales of $3.1 billion (up 29.9% YoY) and operating profit of $242.6 billion (up 123% YoY) in 1Q-3Q 2023. However, the company's operating margins have been highly volatile in the past four years.

The biggest risk factor of Amer Sports is that it is highly leveraged. It had net debt of $5.9 billion and equity of only $8.8 million at the end of 3Q 2023. Therefore, despite the fact that the company has consistently generated positive operating profit in the past four years, it has yet to achieve positive net profit in the same period. Net margin was -9.7% in 2020, -4.1% in 2021, -7.1% in 2022, and -3.7% in 1Q-3Q 2023.

Amid a sharply higher interest rate environment in the past year, we believe that many investors are likely to emphasize the negatives more (especially the excessive leverage and inconsistent operating margins), rather than the positives such as China representing increasing percentage of total sales and profits.