Should you put Ocado on your shopping list? Remember what Adam Smith said

Martin Vander Weyer’s Any Other Business

The flotation of a business that has carved a big slice of a fast-growth consumer market within less than a decade of its start-up ought to be a cause for celebration: an example of capitalism doing what it’s supposed to do in support of entrepreneurs; an affirmation that markets are back in business after their nervous breakdown two years ago. But the share offering for the online grocer Ocado, for which a price will be struck on 21 July, has provoked more of a City brawl than a champagne reception. Some fund managers are enraged by the indicative pricing, which values Ocado at up to £1.3 billion even though it lost £26 million last year on £402 million of sales. And there are so many health warnings in the prospectus that some analysts think the £200 million capital-raising looks more like a rescue than a step up the ladder to success.

Ocado’s people retort that professional investors are cynically trying to talk the price down — but I suspect Ocado’s people are the problem. Its founders, Jonathan Faiman, Tim Steiner and Jason Gissing, are all former Goldman Sachs executives (Gissing was a Bullingdon Club contemporary of George Osborne, by the by) and Goldman is co-sponsor of the deal alongside JPMorgan Cazenove, UBS and a team-sheet of top City firms. Ocado’s chairman is Michael Grade, and among its early backers who stand to do well out of the float are two already very rich men, Jorn Rausing of the billionaire Tetrapak dynasty, and Nick Roditi, a former associate of George Soros. In short, Ocado’s people are about as sophisticated a busload of financiers as it would be possible to assemble, and the feeling is that they have closed ranks to get this deal away, and reap its rewards, sooner than Ocado’s track record really justifies.