Five 'pandemic darling' companies that have lost their shine
A lot of things were different in during the Covid-19 lockdown years. Fights broke out over toilet paper. A lot of banana bread was baked. And a number of companies hit share prices that now seem like a fever dream. While share markets suffered when Covid-19 first started its spread around the world, they quickly rebounded and many companies soared to record highs, as economies fired on low interest rates and other fiscal stimuli. But now, three years on, some investors who jumped in during that period are licking their wounds. Here are five companies that have seen their share prices or valuations drop significantly. Margaret Bei, an equity analyst at Forsyth Barr, said My Food Bag listed on the share market at a time of peak popularity for the meal kit delivery segment. Shares were priced at $1.85 in the March 2021 initial public offer (IPO). On Friday, they were changing hands for 20c. READ MORE: * What went wrong for Ezibuy? * Laybuy: How one company's share price fell from $2 to 3c * Covid left some companies with 'a painful hangover'; now they face a recession Bei said the appeal of the delivery kits had dwindled as the country opened up after lockdowns and people were able to get out to restaurants again. Deliveries were down 12.2% this year. Part of it is related to fatigue, possibly around recipes and possibly around at-home cooking. At the same time, household disposable incomes have also been materially impacted, mostly by rising interest rates, and meal kit deliveries seem to be one of the things that households are cutting back on. Lower delivery volumes are probably being driven by a combination of budget and preference. She said My Food Bag had invested substantially in production capability and now had a higher cost base, but lower volumes, and might be seeing some operating deleverage. It seemed that the company was returning to its pre-Covid trend in terms of deliveries, she said. To see a recovery, demand would need to show some signs of improvement either at the macroeconomic level for households, or the company could mitigate the lower delivery numbers with things like new recipes or innovation to attract new customers. This is something they appear to be actively working on, for example, Bargain Box appeals to more value-orientated customers and that may be budget-conscious. Greg Smith, head of retail at Devon Funds, said the IPO would have left a sour taste with many retail investors who backed it. He said it had proved to be a well-timed exit for the shareholders who sold shares when the company listed. Sources said the outlook for the business now was murky, and other similar businesses around the world had seen their value go to zero but some of the money raised in the IPO had gone on the businesss balance sheet. Laybuy listed on the Australian stock exchange in September 2020 for A$1.41 a share, a value that lifted to A$2.30 before the day was over. But when the company de-listed from the exchange this year, the shares were trading for less than A3c. Co-founder and managing director Gary Rohloff said the company had shifted its strategy from hyper growth to a more sustainable path to profitability but said all listed buy now, pay later providers had sharp share price falls when investors shifted their money from growth companies into profitable blue chip companies. Smith said investors had got a bit carried away with buy-now-pay-later (BNPL) platforms. If you looked at all the share prices of all the BNPL firms and added up those market caps it was hard to get to the addressable opportunity. It became a mania in itself, investors got way ahead of themselves about the BNPL market and what the opportunity was there and how fast that was going to grow. A2 Milks share price peaked in mid-2020 at more than $20 a share but is now down around $6.25. At the peak there was a lot of expectation baked into the share price, Smith said. They did quite well in the onset of the pandemic, with the pantry stocking. But Covid wasnt kind to them. He said a declining birth rate in China was a problem and there was more competition. Its a lot more crowded market than it was, and its becoming an increasingly regulated market. Smith said the company was waiting re-registration to sell its products into the Chinese retail market, which was expected to happen in June or July this year. Matthew Goodson, portfolio manager at Salt Funds Management, said there was a risk that the company could run out of its existing Chinese-label product if that dragged on. Its unlikely but the risk is out there and out of everyone elses hands. He said the world had changed significantly for A2 since Covid. Back in 2018, 2019, their business was basically all done for them by the daigou, they had minimal marketing cost, minimal distribution cost, they didnt even make the formula themselves, they just sat in the middle banking the money, it was the most wonderful business you could ever hope to see. Margins had dropped significantly since then, he said, and A2 had done a lot of work to build up its product distribution in China, which added costs. But he said it was still a solid company, with a rock solid" balance sheet. A2 remains a very powerful business, its just not the near-perfect business it was pre-Covid. Allbirds listed on the Nasdaq in November 2021 for US$15 a share. After the first day of trading, they neared US$30. But this week, they were trading for less than US$1.30. Investors have since said the share prices hit on that first day were pretty silly. While it has big growth plans, it is trading in a volatile environment and is another company likely to be affected by cost-of-living pressures. US legal firms have asked investors who have suffered significant losses to contact them as they seek a lead plaintiff for a class action case. The law firms allege that Allbirds misled investors by placing too much emphasis on non-core products with a narrower appeal, to the detriment of its most popular products, which had a negative impact on sales. Ezibuy was put into administration by its Australian owners, Mosaic Brands, earlier this month , owing creditors $101 million. It was a significant downgrade for a company that had been bought by Woolworths for NZ$350m in 2013, and sold to Alceon Group, a Mosaic Brands shareholder, in 2017 for NZ$32m. In 2019, Mosaic bought a 50.1% interest in Ezibuy from Alceon for A$1, with the option to acquire the remaining 49.9% for A$11m, which it did in October 2021. It said at the time that sales were picking up and 80% of its trading was through its digital platform. "When we purchased a 50.1% stake in EziBuy late in 2019 for just A$1, its fair to say the brand was a little unloved and its potential underestimated," Mosaic Brands managing director Scott Evans was quoted as saying at the time. "Weve quietly and consistently worked in the background to turn around the business and in just 18 months delivered an EBITDA of A$3.7 million for FY21. But Mosaic Brands said sales had dropped off again after the pandemic. The group itself, which runs a number of other retail brands including Millers, has seen its share price drop from just over A$2.50 in January 2020 to 23c. Smith said Ezibuy was probably a casualty of a wider drop in online sales from a Covid peak and a tough retail environment generally. At the same time, the cost of doing business is increasing, which makes it difficult for retailers, both online and bricks and mortar. Other companies that have seen their share prices fall substantially over the same period include Trade Window, which said it would cut staff numbers by about a third , and King Salmon, which has had climate change issues to contend with.