Moonpig (MOON) looks like a very good business that is benefiting from a temporary windfall. Its long-term strategy may deliver good results but investors might be better off waiting for a more favourable entry point.
Over the years I’ve become very sceptical of IPOs coming from private equity sellers. In too many instances they have been very good at selling out at the top when profits have peaked whilst leaving new shareholders saddled with a debt stuffed balance sheet.
Moonpig’s recent IPO does not look like this. Granted, the business floated on the wave of booming trading conditions at a valuation that looked punchy on a lower level of normalised profits, but the selling shareholders are keeping a significant stake in the business – at least for now. While the business does have some debt it is not at levels that would threaten the new shareholders too much.