Dia supermarkets goes public and drops 8.4%

A value-priced company was overpriced. Shares of Dia supermarkets closed 30 cents below its opening price during its first day of trading. The share value dropped 8.4% to 3.2 euros.

Among the explanations: the value-brand supermarket was overpriced at the beginning of the day even though it has better growth potential than other European food distributors in its class.

Despite the falls during its first trading session, the PER (the number of times that the share price is recorded during trading) rose 24 times, while the median of the four largest European grocery chains (Tesco, Ahold, Metro and Carrefour) was around 11.7 times. By next year, this ratio could be more even, considering that the PER for 2012 is just beneath 16 times. Not as much as the average of 10 times that these companies typically see.

Choosing the Spanish stock market

The IPO was unorthodox. By trying to spin off from its parent company Carrefour, Dia´s IPO price was calibrated such that it made the first trade at 3.4 euros. This opening price set the tone for the trading day. "The critical point for the day was when the beginning price started beneath 3.5 euros (the price set before trading began)," confirmed Soledad Pellón, market strategist for IG Markets. The analyst indicated that this was what "pushed back the share prices, making it look like there was little demand."

Translated and Edited in English by Brandon Dyches and Jose L. De Haro