A humbling experience?

Ocado has today floated at 180p a share, much lower than the figures of up to 275p it was aiming for originally, and CEO Tim Steiner and his pals don’t look too clever, especially as the shares are apparently now at about 163p in the shadow trading that’s now taking place ahead of the full market in the shares opening next week.

Jen has just come off the conference call with Steiner where she says he was ratty, compaining he’d visited 12 cities in two weeks and was feeling tired.

The whole IPO process has been an unedifying spectacle. Ocado’s founders got as many banks on board as they could, led by their alma mater Goldman Sachs, which effectively stifled any serious analysis or criticism of the model from the Square Mile with the exception of one or two independent-minded unconnected analysts. In the event, it appears that Ocado required the existing shareholders to dip deeper into their own pockets to get it away.

The price valued the company on a crazy EBITDA multiple - it has, of course, never made a pre-tax profit - on the basis that other companies like Amazon also hadn’t been profitable when they floated. But the problem for Ocado is that it’s been going ten years and profitability at the pre-tax level still seems a long way off, and the model is unproven.

Speak to anyone in grocery and they’ll tell you the reason no-one else does what Ocado does is that it’s impossible to make money from the model. Tesco claims to make money from online grocery - whether it actually does or not depends on whether you believe that the costs incurred by the online operation are charged to it - but what everyone agrees is that running an operation from dedicated warehouses with the terrific level of customer service Ocado offers costs real money that the delivery charges simply don’t recoup.

I’m still uneasy about the Waitrose question too. After all, why would the highly ambitious Mark Price - who set out plans to increase the number of outlets it has sixfold in a weekend newspaper interview - sign a deal allowing Waitrose Deliver to operate inside the M25 from next year if he had no intention of doing it? And as for many Ocado customers Waitrose is the big attraction, if you want to buy Waitrose, there’s a decent chance you’d go to Waitrose rather than Ocado.

That’s not to say I, and we, don’t wish Ocado well. It’s innovative and it provides great customer service, and in time could grow to have genuine scale and make money for its shareholders. It’s good to see new retailers with interesting models going onto the public markets. But the process by which it has entered the stock exchange has left a bad taste in a lot of mouths. The most commonly heard criticism of Ocado’s three founders is that they are arrogant, but I suspect events of the last two weeks may have been a lesson in humility.