Booktopia founder calls it quits as earnings and valuation free fall

There’s no better way to put it - Booktopia (ASX: BKG) is just another dumpster fire IPO from 2021.

Instead of trying to turn the sinking ship around, co-founder and chief executive Tony Nash has today decided to call it quits. In parallel with his departure, Booktopia announced a -63% decline in earnings for the 9 months to 31 March.

The company's stock is down -22% at noon and close to -85% from August 2021 highs.

Numbers at a glance

For the 9 months to 31 March 2020: 

• Revenue of $194.7m, up 9% 

• Earnings of $5.5m, down -63%

• Distribution labour cost per unit of $1.66, up 23%

• Average customer spend of $127, up 7% 

The worst possible moment

It's not a good look for a founder and major shareholder to step away after such an abysmal performance.

At present, Mr Nash is Booktopia's largest shareholder with 22.8m shares or 16.6% of the company.

Since listing in December 2020, he has reduced his shareholding only slightly, from 18.6% or 25.5m shares.

Following the massive destruction of shareholder wealth, the value of Mr Nash’s own holdings have plunged from a peak of approximately $75m to almost $10m.

Ugly narrative

Booktopia said that “the growth in online books sales has moderated” as the economy returns to normal. 

A key headwind was within the academic division, where the blame was placed on: 

• Low volumes of international students

• Reduction in university students in the first semester

• Strong employment market encouraging school-leavers to postpone studies

Lower academic book sales alongside increased operating expenses squeezed margins, especially in the third quarter, where earnings declined -65% to $1.5m.

Booktopia tried to reassure investors that things are now operating smoothly, and "will improve again when the second distribution centre is fully commissioned in the next few months."

Full-year outlook

Booktopia expects to deliver full-year revenue of approximately $242m, an 8% increase compared to last year.

Earnings is expected to be between $3-4m, down -70% to -78%. While net profit is expected to be a loss.

Food for thought

There's plenty of Booktopia-like narratives floating around like Kogan (ASX: KGN) and Redbubble (ASX: RBL).

It goes to show that without a fundamentally sound narrative and willing buyers, stocks can be worth less than paper.

Booktopia 12-month price chart