On Running, the red-hot Swiss running shoe brand, staged a successful initial public stock offering Wednesday reportedly raising about $746 million at a stock price higher than expected.
By early afternoon, On stock surpassed $35 a share, up from the opening price of $24.
On’s warm reception on Wall Street is good news for the company and the embattled city of Portland.
On Holding AG, an affiliate of On Running, was the company that actually sold the stock.
With its treasury suddenly stuffed with proceeds from the stock offering, one of On’s first orders of business will be to move its North American headquarters staff into larger quarters. And after considerable soul-searching, On management has decided to keep its North American headquarters in Portland.
The company will move into 30,000 square feet of Pearl District office space in the Tanner Point building early next year. The new space is triple the size of its current office in Northwest Portland.
“We’re doubling down on Portland,” said Britt Olsen, the company’s North American general manager. “We’re hoping the city can clean itself up.”
Months of civil unrest, arson and vandalism and the continued homelessness crisis have combined with COVID-19 to turn Portland’s vital downtown into a trash-strewn mess. The district is slowly improving as more people who have been working remotely return to work. Yet that comes after a handful of companies and wealthy individuals have moved out of downtown or left the city altogether.
On management is frustrated with the city’s inability to address the problems. The company backed off plans to build a new, larger flagship retail store in downtown Portland because of the many issues.
“We would have signed a lease by now if the city got its act together,” Olsen said.
But in the end, they decided the pros outweigh the cons. Said Olsen: “Portland is our home. It’s where our employees are, where they live, where they run. It’s too important to leave.”
Olivier Bernhard, three-time triathlon world champion from Switzerland, for years tinkered with shoe design convinced he could create a better running shoe. In 2010, he and two friends founded On, which unveiled its own cushioning system dubbed “CloudTec”. All three of the founders will remain with the company after the offering, according to documents the company filed with federal regulators.
Those documents also offer outsiders the first detailed look at On’s financial performance.
Net sales hit about $463 million in 2020, up from $292.1 million the year before.
North American sales should triple this year, Olsen said. North American sales reached about $226 million in 2020.
On lost money in both the last two years, $2.9 million in 2019 and $27.5 million in 2020.
“They continue to tear it up,” said Matt Powell, a prominent analyst of the sneaker industry with the NPD Group. “When I talk to runners wearing these shoes, they say they love them. Their customers are quite enthusiastic.”
Investors liked what they saw. On initially said it would price its stock at $18-$20 a share. Strong demand convinced the company to up the price to $24 a share. That price puts the value of the company at above $6 billion.
On’s rank and file got a piece of the action. Employees who are not already participating in the company’s equity plan who have been with the company for at least six months will get founder’s grants. Documents filed by On with the SEC state that workers will get $8,000 worth of stock for every six months they’ve been with the company.
COVID-19 has become a problem for On, as it has for the rest of the industry. Vietnam, home to a large percentage of the world’s sneaker factories, has implemented strict lockdowns to limit the virus’ spread. That has seriously disrupted operations at the footwear manufacturers.
“All eyes are on Vietnam right now,” Olsen. “The country has been shut down for about six weeks. Our industry will inevitably suffer.”
On management is hoping the stock offering will overshadow Vietnam and COVID-19, at least for a few days. All employees who’ve been with the company for six months or more will get a founders’ grant of company stock.