FRANKFURT Europe's largest online fashion retailer, Zalando, is considering reducing the size of its stock market listing, people familiar with the transaction said on Monday.
"I do not think it will be a transaction larger than a billion euros ($1.36 billion)," one of the sources said, adding that only 10-15 percent of the company may be floated. "But no final decisions have been taken yet."
Zalando, which is being advised by Credit Suisse CSGN.VX, Morgan Stanley (MS.N) and Goldman Sachs (GS.N), is aiming to list its shares in October, the sources said, adding it will send out an intention to float in September.
Originally, the group had discussed a listing worth more than one billion euros, potentially making it Europe's biggest technology offering since Germany's T-Online (DTEGn.DE) debut in 2000.
Zalando's biggest investor, Swedish firm Kinnevik (KINVb.ST), has said in the past its 36 percent stake in Zalando was worth 12.14 billion Swedish crowns ($1.81 billion), putting a value of 3.8 billion euros on the whole company.
At that valuation, a flotation of 10-15 percent would result in an IPO volume of 380-570 million euros.
"It is hard to find Zalando investors who want to divest their stakes and any capital increase has its limits," a second source said.
A cap hike usually balances the financial needs of a company with the interest of existing shareholders not to have their stakes diluted too much.
Further market participants pointed to the recent development of European technology stocks .SX8P, which are down roughly 3 percent since the beginning of the year, while overall European stock markets .FTEU3 are up 5 percent.
"Internet shares have come under pressure. So it makes a lot of sense to adjust the size of the Zalando IPO," a market participant said.
Investors have in recent months embarked on a sell-off of high-flying tech stocks like Twitter (TWTR.N) and Amazon (AMZN.O), reviving doubts about soaring tech valuations.
Global initial public offerings have risen significantly this year with Europe leading the way thanks to a nascent economic recovery that lifted investors' confidence and stock markets. But investors are getting more choosy over where they park their money and are turning away from businesses with the most questionable valuations.
Zalando's first quarter sales rose 35 percent to 501 million euros, slightly down from a 36 percent growth rate in the previous quarter, while the group's core margin improved significantly in the period.
Zalando and its IPO banks declined to comment.
(Reporting by Arno Schuetze and Alexander Hübner, editing by David Evans)