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Jeffry Bartash
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Tag: Initial Public Offerings
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Birkenstock’s stock falls 10% in trading debut after IPO priced at lower end of range
Iconic German sandal maker Birkenstock Holdings Ltd.’s stock fell 10% out of the gate in its trading debut Wednesday, signaling that investors remain cautious about new deals and the casual-footwear market remains competitive.
The company’s initial public offering priced at $46 a share late Tuesday, a bit shy of the midpoint of its expected range. The company
BIRK,
-11.63%
is trading on the New York Stock Exchange under the ticker “BIRK.” Goldman Sachs, JPMorgan and Morgan Stanley were the lead underwriters on the deal.The deal was expected to prove the latest test for the IPO market, which recently saw three key deals perform strongly on their first day of trade, only to fall back in subsequent sessions.
Chip maker Arm Holdings Ltd.
ARM,
-1.09%
; Klaviyo
KVYO,
-3.11%
a digital marketing company; and Instacart, which trades as Maplebear Inc.
CART,
-7.04%
; all enjoyed strong gains on their first day of trade but pared those in the following sessions. Instacart was quoted at $25.50 on Wednesday, well below its issue price of $30.Birkenstock clearly has its fans, as its customers are brand loyal, with 70% of existing U.S. consumers, for example, purchasing at least two pairs of its shoes, according to its filing documents.
A survey found 86% of recent purchasers said they wanted to buy again, while 40% said they did not even consider another brand while buying.
But as Kyle Rodda, Senior Market Analyst at Capital.com, said the Birkenstock deal was to be a good measure of broader market sentiment and sentiment toward consumer-sensitive stocks.
“It might tell us, too, whether cashed-up millennials like to buy the stocks of products they commonly find on the bottom shelf of their wardrobes,” he said in emailed comments.
The valuation of around $8.6 billion also looks rich, he said. Based on the company’s latest revenue release, the stock’s price-to-sales ratio is above 6, “which is at the higher end of comparable consumer discretionary companies on Wall Street.
“In a higher interest rate environment, these multiples may be hard to sustain in the short term, especially if consumer spending slows as expected next year as interest rate hikes bite households,” Rodda said.
David Trainer, Chief Executive of independent equity research company New Constructs, said ahead of the deal that the valuation was far too high, noting that it was higher than peers such as Skechers USA Inc.
SKX,
-0.67% ,
Crocs Inc.
CROX,
-0.12%
and Steve Madden Ltd.
SHOO,
+0.60% .“Even more shockingly, the only footwear companies with a larger market cap are Nike Inc.
NKE,
+0.80%
and Deckers Outdoor
DECK,
-0.07% ,
” he said, referring to the maker of Uggs.“While Birkenstock is profitable, we think it is fair to say that the $8.7 billion valuation mark is too high, especially for a company that was valued at just $4.3 billion in early 2021. Not a whole lot has changed since then,” Trainer said in a report.
For more, see: Birkenstock is going public: 5 things to know about the iconic German sandal maker’s IPO designs
Trainer estimated that Birkenstock would need to generate more than $3.8 billion in annual revenue to justify its valuation, which is more than three times the $1.24 billion chalked up for all of 2022, according to its filing documents with the Securities and Exchange Commission.
“We don’t doubt that Birkenstock has strong brand equity and produces stylish sandals, but there is really no reason for this company to be public,” said Trainer. “We don’t think investors should expect to make any money by buying this IPO.”
The Renaissance IPO exchange-traded fund
IPO
has gained 29% in the year to date, while the S&P 500
SPX
has gained 13%. -
Birkenstock prices IPO at $46 a share, at low end of range
Iconic German sandal maker Birkenstock priced its initial public offering at $46 a share late Tuesday, a bit shy of the midpoint of its expected range, as investors remain cautious about new public debuts and the casual-footwear market remains competitive.
With that pricing, Birkenstock would fetch a valuation of around $8.6 billion. The company did not immediately respond to a request for comment.
Birkenstock had expected to sell more than 32 million shares at an IPO price of between $44 and $49 a share. The company is expected to start trading on the New York Stock Exchange on Wednesday under the ticker “BIRK.” Goldman Sachs, JPMorgan and Morgan Stanley are the lead underwriters.
Also read: Birkenstock’s looming IPO is expected to become the next test of investor appetite for deals
The roughly 250-year-old company would make its debut as other large shoe makers, such as Nike Inc.
NKE,
+0.76%
and Adidas
ADDYY,
+1.44% ,
try to capitalize on a broader consumer shift toward more casual sneakers and attire. Birkenstock, which unlike many IPOs is profitable, describes itself as a company that has been welcomed across a variety of scenes over the decades — hippies in the 1970s, environmentalists in the ’80s and, in the ’90s, women inspired by the feminism movement looking for relief from high heels.“Today, consumers turn to Birkenstock in their search for healthy, high-quality products and as a rejection of formal dress culture,” the company said in its IPO filing.
More recently, Birkenstock’s Boston clogs have enjoyed a rebound in popularity. The “Barbie” movie, which features the sandal, has also spurred greater interest. And the company, which depends on the Americas and Europe for a lot of its sales, has been investing more in e-commerce.
Still, Birkenstock faces “material indebtedness,” and “material weaknesses” in its financial controls, according to its IPO filing. And its debut would follow some shakier performances from other recent IPOs, like Maplebear Inc.
CART,
+9.16% ,
better known as the online grocery delivery service Instacart, and chip designer Arm Holdings
ARM,
+2.69% .
Shares of those companies are down since their debuts.Renaissance Capital Founder and CEO Bill Smith said Birkenstock was hoping to appeal to investors based on a “combination of profitability and growth, along with widespread brand recognition.”
However, New Constructs Chief Executive David Trainer raised concerns about the company’s potential valuation, when compared with rival footwear makers, and noted the weaker performances from Instacart and Arm.
“We don’t doubt that Birkenstock has strong brand equity and produces stylish sandals, but there is really no reason for this company to be public,” he said. “We do not think investors should expect to make any money by buying this IPO.”
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SmileDirectClub’s stock plummets 85% after Chapter 11 bankruptcy filing
SmileDirectClub Inc. shares plummeted in the extended session Friday after the company said it had voluntarily filed for Chapter 11 bankruptcy protection as founders seek to recapitalize the teeth-straightening business.
SmileDirectClub shares SDC, which had been halted while up 0.9% in after-hours trading pending news, promptly dropped as much as 85% when trading in the stock reopened.
The…
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Klaviyo prices IPO at $30: reports
The digital automated marketing platform Klaviyo has priced its IPO at $30, above its expected range, according to reports on Tuesday from Bloomberg and Reuters, which cited people familiar with the matter. The reports arrived after Klaviyo on Monday said it planned to offer 19.2 million shares it hoped would price between $27 and $29 each. The company did not immediately respond to a request for more information. Shares are expected to begin trading on Wednesday on the New York Stock Exchange under the ticker symbol “KVYO.”
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Instacart stock indicated to soar 30% at its open
Shares of Instacart
CART,
are set to receive a warm reception in their Wall Street debut, as early indications are for the grocery delivery app’s stock to open about 30% above where the initial public offering priced. While the stock isn’t expected to trade for a while, perhaps hours, the first indication from the Nasdaq was for the first trade to be around $39.00, while the IPO priced at $30 a share, according to FactSet data. At that price, the company, which is officially named Maplebear Inc. and doing business as Instacart, would be valued at about $13.2 billion, based on 338.8 million common shares outstanding (as-converted, fully diluted). In last week’s high-profile IPO of semiconductor-design company Arm Holdings PLC, the stock’s
ARM,
-4.59%
first trade was 10% above the IPO price, but it closed 24.7% above the IPO price on the first day. -
Instacart prices IPO at $30 a share, at upper end of expected range
The grocery-delivery app Instacart on Monday priced its IPO at $30 a share, at the upper end of its expected range, raising $660 million with a fully-diluted valuation of around $10 billion after backing away from a stock-market debut last year.
The company said it plans to begin trading on the Nasdaq Global Select Market on Tuesday under the ticker symbol “CART.” It will offer 22 million shares in the IPO. On Friday, Instacart had said it expected to price the offering at between $28 and $30 a share.
Goldman Sachs and J.P. Morgan are acting as lead book-running managers for the offering. Instacart said it also granted the underwriters a 30-day option to purchase up to an extra 3.3 million shares at the IPO price. The offering is expected to close on Thursday.
The debut would come amid what appears to be a thaw in the IPO market, following a year of concerns about inflation and the broader economy. But the public debut of chip designerArm Holdings
ARM,
-4.53%
last week made big waves. The digital-marketing platform Klaviyo is set to debut this week as well.Instacart’s valuation in 2021 stood at $39 billion. Last year, as pandemic-era digital demand fizzled, the company cut its valuation multiple times, but raised it this year, according to The Information.
Instacart, in its IPO filing, said the way people shop for groceries is undergoing a “massive digital transformation.” Evercore analysts have said the company controls around a fifth of the U.S. online grocery-delivery market.
But the company faces steep competition — from the likes of Walmart Inc.
WMT,
-0.74% ,
Amazon.com Inc.
AMZN,
-0.29%
and DoorDash Inc.
DASH,
-0.01%
— and relies on a handful of grocery chains for a big chunk of its demand. And delivery fees on top of higher-priced groceries remain threats to demand. -
Klaviyo reportedly raises price range of its upcoming IPO
Klaviyo Inc. is reportedly raising the target of its upcoming initial public offering to more than $550 million.
Bloomberg News reported late Sunday that Klaviyo has decided to raise the target range for its shares to $27 to $29, up from its previously stated range of $25 to $27 a share. At the top of that new range, the IPO would raise $557 million, with the company valued at about $8.7 billion, according to Bloomberg.
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Arm Sets IPO Price at $51 a Share. The Stock Is Set to Open Higher.
Arm is set to start trading today on the Nasdaq under the symbol ARM.
Chris Ratcliffe/Bloomberg
Arm Holdings
priced its initial public offering at $51 a share. That’s at the top of the expected range of $47 to $51, giving the chip design company a valuation of $54.5 billion on a f… -
Arm prices IPO at high end of range, raising $4.87 billion
Arm Holding Ltd. priced its initial public offering at the high end of its expected range late Wednesday following intense interest.
The British chip-design company priced shares at $51, raising $4.87 billion, following earlier reports that Arm would be pricing its IPO at $52 a share. A source close to the deal confirmed to MarketWatch that $52 had been the expected price, but that it was reduced to $51. That puts the chip designer at just over a $52 billion valuation. Recently, Arm had stated a targeted range of $47 to $51.
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Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years
The second week of September, as in the NFL, marks a kickoff of sorts for the tech year.
Headlined by Apple Inc.’s
AAPL,
+0.72%
seminal iPhone event on the second Tuesday of the month at Apple Park, and anchored by Salesforce Inc.’s
CRM,
+0.33%
wildly popular Dreamforce conference up the road in San Francisco, these several days set a tempo as well as establish a road map for the industry over the next 12 months. They also open the floodgates on tech conference season, with shows stacked up over the next several weeks for Facebook parent Meta Platforms Inc.
META,
+3.33% ,
Microsoft Corp.
MSFT,
+1.21% ,
and Oracle Corp.
ORCL,
+0.32% .Oh, and there’s that initial public offering from Arm Holdings Plc, the chip designer owned by SoftBank Group Corp.
9984,
+3.86%
that is expected to value Arm at $50 billion to $54.5 billion on a fully diluted basis. Another IPO candidate, delivery startup Instacart, also plans a public offering that would value it at $7.5 billion. Both deals could jump-start what has been a somnolent tech IPO market the past few years.For that reason alone, this jam-packed tech week might hold even more import, and consequences, than previous years. A confluence of legal tussles, macroeconomic conditions, a trade war with China, and regulatory bluster have raised the stakes.
“It’s a tale of two cities with this week’s events highlighting both the issues and opportunities in tech,” Silicon Valley analyst Maribel Lopez said in an interview, assessing the week. “Arm’s IPO showcases the strength of tech and AI at a time when the AI forum and Google-DoJ shine a light on the concern that a few companies are wielding tremendous power for the future of the world.”
Consider: Hours before Apple is expected to unveil a new crop of iPhones more noteworthy for pricing than features, Alphabet Inc.’s
GOOGL,
+0.51% GOOG,
+0.47%
Google faces off with the Justice Department in a federal court in Washington, D.C.Justice Department officials argue that Google illegally leveraged agreements with phone makers such as Apple and Samsung Electronics Co.
005930,
+0.71%
and with internet browsers like Mozilla to be the default search engine for their customers, thus preventing smaller rivals from gaining access to that business.“This is a backwards-looking case at a time of unprecedented innovation, including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before,” Google General Counsel Kent Walker said in a statement.
The following day, Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., convenes an all-star panel of CEOs from Meta, Microsoft, Google, OpenAI and Palantir Technologies Inc.
PLTR,
+4.82% .As lawmakers ruminate on how to harness AI responsibly, bipartisan legislation is in the works. Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., are among those crafting a bill.
Even Apple and Salesforce aren’t immune from recent events: Apple has endured a relatively rough patch of disappointing (for them) revenue and iPhone sales while balancing risk/reward with its huge investment in China, and Salesforce CEO Marc Benioff has threatened to relocate Dreamforce to Las Vegas after more than two decades in his hometown of San Francisco if drug use and homelessness disrupt this year’s event.
The most pressing concern, when all is said and done, is AI — which hovers like the Death Star over the tech landscape.
“The biggest concern is the forum is behind closed doors, which could lead to regulatory capture, where dominant players in the industry help influence the regulations being imposed,” Kimberlee Josephson, associate professor of business administration at Lebanon Valley College (Pa.), said in an interview. “It’s almost as if it puts them in the hot while giving them a seat at the table at the same time.”
“At the very least, it sends the signal that something is being done,” she said. “Antitrust cases are so subjective. What constitutes barriers to entry? DoJ adds a level of seriousness.”
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Arm Sets Target Valuation for IPO. It’s Likely to Be the Biggest of the Year.
Arm Holdings is set for a blockbuster initial public offering which will test market appetite for an important technology company. However, its targeted valuation suggests it is accepting it won’t be the next
Nvidia
… -
Chip designer ARM targets IPO valuation of up to $55 billion: report
Arm Holdings Ltd.’s initial public offering could give the company a valuation between $50 billion and $55 billion in what may be the biggest offering of the year.
The British chip designer, whose circuit designs lie inside billions of electronic devices, intends to start meeting as early as Tuesday with prospective investors ahead of its stock-market debut on the Nasdaq exchange the following week, according to a Wall Street Journal report, which cited multiple unnamed sources.
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Credit Suisse Drops Real-Estate Fund IPO Plan
By Adria Calatayud
Credit Suisse said it has abandoned its plan to launch an initial public offering for its Credit Suisse 1a Immo PK real-estate fund due to low trading volumes for listed Swiss real-estate funds.
The Swiss bank–now part of UBS Group–said Thursday that Credit Suisse Funds decided not to carry out the IPO, which had been planned for the fourth quarter of 2023, and that this will allow the newly formed real-estate unit within UBS Asset Management to coordinate its offer of real-estate investment services.
A fall in trading volumes on the market for listed Swiss real-estate funds would likely have meant higher volatility in the event of a listing, Credit Suisse said.
The bank last year postponed the IPO of the fund, citing market conditions and the high volatility.
Write to Adria Calatayud at adria.calatayud@dowjones.com
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Chip designer Arm files for long-awaited IPO, as smaller transistors send costs skyrocketing
Arm Holdings Ltd. filed its long-awaited initial public offering late Monday, following last year’s failed bid by Nvidia Corp. to acquire the U.K.-based chip architecture company.
Arm has reportedly been seeking to raise $8 billion to $10 billion at a valuation of $60 billion to $70 billion, making its IPO the biggest of the year so far, and a number of large tech companies, including Amazon.com Inc.
AMZN,
+1.10% ,
Intel Corp.
INTC,
+1.19%
and Nvidia
NVDA,
+8.47% ,
are reportedly in the mix to be anchor investors.In a late Monday filing with the Securities and Exchange Commission, Arm said it was offering to list its U.S. traded shares on the Nasdaq under the ticker symbol “ARM.”
Arm, which is owned by Japan’s SoftBank Group Corp.
9984,
+1.16% ,
was the target of an unsuccessful $40 billion acquisition by Nvidia last year. After Nvidia scrubbed the deal and paid a $1.36 billion breakup charge following the U.S. Federal Trade Commission’s unanimous decision to block it, Nvidia disclosed it paid Arm $750 million for a 20-year license to its technology.At the time of the breakup, chips sales had hit record highs in 2021, surging 26.2% to a record $555.9 billion, fueled by pandemic-triggered shortages. But the chip industry has since swung to a glut.
Arm listed Barclays, Goldman Sachs, JP Morgan, Mizuho, BofA Securities, Citigroup, and Deutsche Bank Securities among the IPO’s underwriters.
Recent reports said SoftBank was in discussions to purchase the 25% stake in Arm that it does not outright own, which is held by its Vision Fund 1, ahead of the IPO.
Read from Feb. 2022: Wall Street’s reaction to death of Nvidia-Arm deal: No duh
Arm reported net income of $524 million, or 51 cents a share, on revenue of $2.68 billion for fiscal 2023, which ended March 31, compared with net income of $549 million, or 54 cents a share, on revenue of $2.7 billion, in fiscal 2022, and $388 million, or 38 cents a share, on revenue of $2.03 billion in fiscal 2021.
Arm uses an architecture that is different from the once-standard x86 one built by Intel in the early days of computing.
The company said it has shipped more than 250 billion Arm-based chips since its started in 1990 as a joint venture between Acorn Computers, Apple
AAPL,
+0.77%
and VLSI Technology. In fiscal 2023, Arm said it shipped 30.6 billion chips.The company said it is going public as the “resources required to develop leading-edge products are significant and continue to increase exponentially as manufacturing process nodes shrink.” Transistors are expressed in scales of nanometers, with design costs running about $249 million for a 7-nanometer chip and about $725 million for a 2-nm chip.
“As the world moves increasingly towards AI- and [machine language]-enabled computing, Arm will be central to this transition,” the company said in the filing. “Arm CPUs already run AI and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.”
Arm said it is working with Alphabet Inc.
GOOG,
+0.64% GOOGL,
+0.71% ,
GM’s
GM,
+0.45%
Cruise, Mercedes-Benz
MBG,
+0.78% ,
Meta Platforms Inc.
META,
+2.35% ,
and Nvidia “to deploy Arm technology to run AI workloads.” -
SoftBank looking to buy remaining 25% stake in Arm from its Vision Fund: report
SoftBank Group Corp. is reportedly in discussions to purchase the 25% stake in chip designer Arm Ltd. that is held by its Vision Fund 1, ahead of a highly anticipated IPO.
Reuters reported Sunday that Japan’s SoftBank
9984,
+0.37%
— which owns 75% of Arm — is negotiating a deal with VF1, the $100 billion investment fund it created in 2017, and noted that a deal could give VF1 investors a big boost after years of meager returns. Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. are among VF1’s largest investors.SoftBank is planning to launch a long-awaited initial public offering for British chip designer Arm as soon as September. That will likely be the biggest IPO of the year on Wall Street, aiming to raise $8 billion to $10 billion at a valuation around $60 billion to $70 billion.
A number of large tech companies, including Amazon.com Inc.
AMZN,
-0.11% ,
Intel Corp.
INTC,
+0.61%
and Nvidia Inc.
NVDA,
-3.62% ,
are reportedly in the mix to be anchor investors in Arm’s IPO.Last week, SoftBank reported its tech-heavy Vision Funds turned a quarterly profit for the first time in 18 months
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Cava Group’s stock soars 11% as analysts start coverage on a bullish note
The stock of Mediterranean-style fast-casual restaurant chain Cava Group Inc. soared 11% Monday, after analysts initiated coverage on the stock which made its debut on public markets in mid-June with a flurry of buy ratings.
At least four of the banks that were underwriters on the initial public offering — JP Morgan, Stifel, William Blair and Jefferies — assigned the stock a buy rating or the equivalent.
FactSet shows one bank has a hold rating but it’s a restricted listing so it’s not clear who it’s from.
The company
CAVA,
+8.04%
raised $317 million in its initial public offering, which priced above its proposed range at $22 a share and immediately rallied on opening. The company issued 14.4 million shares at a valuation of $2.45 billion. The stock was last trading at $43.83.The company is not profitable and has high cash burn and just $23 million in cash and cash equivalents on its balance sheet, according to its IPO filing documents.
But analysts were unfazed, with William Blair analysts calling it a clear leader in a fast-growing category with proven geographic appeal.
“CAVA has hit upon a winning formula with its customizable menu of bowls and pitas featuring bold Mediterranean flavors that can fit in any dietary preference,” wrote analysts led by Sharon Zackfia.
“CAVA’s customer appeal is evident in average unit volumes (AUVs) of roughly $2.5 million and a 44% five-year revenue CAGR through 2022.”
The company accelerated its growth with the 2018 acquisition of Zoës Kitchen, “which provided immediate access to attractive real estate in new markets while enabling capital-efficient densification in top-tier trade areas (Zoës conversions roughly half the cost of a typical greenfield CAVA),” they wrote.
That has set the company up to end 2023 with roughly triple the number of locations as it had in 2020.
William Blair estimates that there’s room for at least 1,200 domestic Cava restaurants based on the population per restaurant already achieved in Virginia, where it’s still adding locations.
That supports management’s target of 1,000-plus locations by 2032.
“We also see the potential for digital drive-thrus to further lengthen CAVA’s growth runway while lifting AUVs (and potentially returns), with about one-third of this year’s new units having drive-thrus, ramping up to about half in 2024 (versus roughly 20 drive-thrus today),” they wrote. William Blair initiated coverage with an outperform rating.
JP Morgan launched coverage with an overweight rating and a December 2024 $45 stock price target. Analysts cheered the entrepreneurial sprit of Founder and CEO Brett Schulman with help from Chairman Ron Shaich, the founder of Panera Bread.
“In-store design/operational procedures and back-end support for the network allows CAVA to be efficient, safe and consistent as the brand leverages these systems for its goal national brand penetration,” they wrote in a note to clients.
Mediterranean cuisine covers many types of food and occasions, so the end-market is large, topping out at more than $1 trillion in U.S. sales.
While bowl builds priced at $10.95 to $16.95 will likely limit a high frequency of lower-income consumers, “we believe the brand has an enduring appeal to a very broad customer base for at least occasional usage.”
And suburbs are 82% of the site mix and are expected to remain a key location base, they added.
Stifel and Jefferies analysts initiated coverage with a buy rating and $48 price target. Stifel analysts led by Chris O’Cull also cheered the wide appeal of the food and compelling unit-level returns and highlighted the company’s healthy balance sheet.
“The company is in strong financial condition with no funded debt and roughly $340M in cash on hand following the company’s IPO,” they wrote in a note to clients. “We project the company’s average quarterly cash balance will remain above $200M with no funded debt for the foreseeable future. We project positive annual free cash flow starting in 2026.”
Still, not everyone is convinced the company is a buy. David Trainer, chief executive of New Constructs, an independent equity research firm that uses machine learning and natural-language processing to parse corporate filings and model economic earnings, published a series of critical reports before the IPO.
Trainer questioned Cava’s ability to reach profitability and its high valuation. He even compared it to WeWork
WE,
+5.80% ,
the infamous startup created by Israeli entrepreneur Adam Neumann, that at its peak was valued at $47 billion, but is now trading at just 26 cents a share, or a market cap of $521 million.The Renaissance IPO ETF
IPO,
+0.52%
has gained 32% in the year to date, while the S&P 500
SPX,
-0.07%
has gained 15%.For more, see: Fast-casual restaurant chain Cava Group’s IPO documents raise some red flags: analyst
Read now: Cava Group CFO is confident restaurant chain will be profitable—but she won’t say when
Related: 5 things to know about the fast-casual Mediterranean restaurant chain Cava
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Yahoo CEO says the company plans a return to the public markets
Yahoo, an early trailblazer of the Internet boom, is “very profitable,” and ready to return to public markets via an initial public offering.
That’s according to Chief Executive Jim Lanzone, who made the comment in an interview with the Financial Times published Tuesday. Yahoo soared to prominence in the 1990s, rising in the public consciousness alongside its share price — under the ticker symbol “YHOO” — during the dot-com boom.
Apollo Funds purchased the Yahoo business from Verizon Communications Inc.
VZ,
+0.24%
in 2021.The web services provider, which competes with the likes of Google parent Alphabet Inc.
GOOGL,
+0.17%
and Facebook parent Meta Platforms Inc.
META,
-0.33% ,
said earlier this year that more than 20% of its workforce would be laid off. At the time, Lanzone reportedly said that the cuts would be made in an unprofitable area of its business but that they would be “tremendously beneficial” to the company overall.“Whether it’s finance, or sports or news, that’s still what we do, and why we’re No. 1, or No. 2, in all these important categories all these years later,” Lanzone reportedly told the FT. “While the company has had struggles [at] different points in time, we’re still huge in traffic, and we have our best days ahead of us productwise.”
He said Yahoo would be aggressively looking at the chance to build businesses in related sectors via M&A — it recently bought Wagr, a sports-betting app. While Yahoo is still “too small” to take on Google and Microsoft’s
MSFT,
-0.75%
search engine Bing, Lanzone said he’s optimistic, and also sees AI offering up new opportunities for the company. -
Like choosy shoppers at a retail store, IPO investors are demanding discounts and displaying price sensitivity
IPO investors, much like retail shoppers in recent years’ inflationary environment, are demanding clear discounts and demonstrating sensitivity to price and valuations, according to Renaissance Capital.
The provider of IPO exchange-traded funds and institutional research said that’s a positive — even if tech unicorns in the pipeline would prefer it were not the case.
“Quality consumer names are working,” said Matthew Kennedy, senior strategist at Renaissance, listing Kenvue, Cava Group Inc., Gen Restaurant Group Inc. and Savers Value Village Inc. as examples of recent new issues that enjoyed strong debuts.
Kenvue
KVUE,
+1.65% ,
the former consumer arm of Johnson & Johnson
JNJ,
+0.87%
and parent of household-name products such as Tylenol and Band-Aid, raised $3.8 billion in its May IPO at a valuation of $41.08 billion, making it the biggest deal of the year to date.Cava Group
CAVA,
-5.93% ,
the loss-making Mediterranean-style fast-casual restaurant group, raised $317 million in its mid-June deal at a valuation of $2.5 billion. The stock popped more than 99% on its first day of trade.For more: Cava Group CFO is confident restaurant chain will be profitable — but she won’t say when
Gen Restaurant Group
GENK,
+13.95%
is a profitable Korean barbecue chain that made its debut Wednesday with a more than 50% pop in early trade.“But broadly investors are still demanding clear discounts to public peers, especially if they take issue with certain aspects of a deal. So it’s good to see that valuation sensitivity,” said Kennedy.
Savers Value Village
SVV,
+3.45%
went public Thursday with some fanfare, closing 27% above its $18 issue price. The company is the biggest for-profit thrift-store chain in North America, with 317 stores that operate under multiple names.The company is profitable, with net income of $11.9 million in the quarter through April 2, after a loss of $10.2 million in the same period a year earlier. For all of 2022, it had net income of $84.7 million, up from $83.4 million in 2021.
Revenue for the quarter came to $327.5 million, down from $345.7 million in the year-ago period. Revenue totaled $1.4 billion for 2022, up from $1.2 billion in 2021.
See: Money-losing food chain Cava showed IPO success. Is it finally time for some tech deals?
Two other deals that made their debut on Thursday fared less well, however.
Texas-based Kodiak Gas Services Inc.
KGS,
+3.44%
and Fidelis Insurance Holdings Ltd. closed lower after pricing below their estimated ranges and making other accommodations to get their deals through.Bermuda-based Fidelis, a reinsurer, downsized its deal to 15 million shares from a previous expectation that it would offer 17 million. The initial public offering was priced at $14 a share, below the proposed $16-to-$19 range.
Maker of oil- and gas-production equipment Kodiak opened almost 3% below its issue price of $16, which was well below its proposed price range of $19 to $22.
Fidelis has an unusual structure, in that it uses a third party for origination, underwriting and claims management, said Kennedy.
“We think insurance investors wanted a discount for a company that didn’t own the underwriting group,” he said. “It has an experienced management team, though, so now they’ll just need to execute.”
Kodiak, meanwhile, carries substantial debt and will need to undertake significant capital spendig in the coming years, just as gas prices have fallen back.
It’s also worth noting that the last big oil and gas IPO, Atlas, “is slightly below its offer price,” Kennedy said.
Atlas Energy Solutions Inc.
AESI,
-2.75%
went public in March at an issue price of $18 a share. The stock was last quoted at $17.52.Still, Renaissance is expecting a gradual reopening of the IPO market in the second half, said Kennedy, who noted that the IPO ETF
IPO,
+1.38%
has gained about 30% in to date in 2023, outperforming the S&P 500’s
SPX,
+1.23%
14% gain.To date, there have been 52 IPOs this year, up 33% from the same time last year, when the market was effectively frozen. Almost $9 billion in proceeds have been raised, up 115% from last year but well below levels seen in frothier times.
