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Ocado shares trade at discount to float price

Internet grocer Ocado is today trading at a discount to its float price of £1.80, having traded as low as £1.55, even after a reduction in the offer price yesterday. It would seem that a mixture of economic concern, market resistance to new issues and debate over the valuation of the company have come to the fore to create a very difficult trading environment. So what next?

Chief executive Tim Steiner is still adamant that the company is undervalued and told journalists of his views in a conference call today. He believes that investors are looking "in the rear view mirror" and not taking account of changes in the company and its marketplace in the future. The company is 10 years old and while great progress has been made it is worth remembering that the company has yet to make a pre-tax profit. Set against a valuation for the company approaching £1 billion it is perhaps easy to see why concerns have been raised especially in the current market climate.

It will be interesting to see how the company performs in the short to medium term and indeed whether its policy of delivering from one central depot is more cost-effective than delivering from individual stores.

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