Investors squeeze Ocado before they buy

Well it’s finally happened. The eagerly awaited listing of Ocado has taken place.

Despite last minute market jitters about the £1bn valuation of the internet grocer, or should I say "technology" company, trading has now begun. Initial prices meant it missed its target valuation but not by as much as was speculated. However, the share prices did close somewhat down on the listing price giving the company a market cap of £870m at the end of its first trading day.

My struggle to define Ocado's activities is perhaps symbolic of the issues facing investors and perhaps one of the reasons the IPO has received less enthusiasm than envisaged.

To the humble consumer, Ocado are the people who deliver your groceries in brightly coloured food-themed vans, in allocated time slots of your choosing if you are too busy to go down and feel your own fruit and vegetables in person.

Now this is where I have a differing view. Please don't get me wrong – I love the concept of online retailing, it’s convenient, it’s available for everyone anywhere and at any time of the day. But I can't get away from the fact that when I buy my food I want to see it, touch it, feel it and compare it with its surrounding food peers.

Maybe this is conceptually one of the issues around Ocado, the company hasn't yet shown a profit, its founders aren't from a retail background and some supporters see it as a technology stock while in reality it’s an online retailer.

So if you wish to pick Ocado up and give it a squeeze or look at it in comparison with the next item on the shelf it’s a bit hard to know what to compare it to.

Therein lies the dilemma facing investors.

Filed under: Ocado, Investors