Krispy Kreme Doughnuts Inc (NASDAQ:DNUT) is preparing to return to the public market for the first time in five years when the opening bell rings in New York on Thursday morning, however, the float may have a bittersweet taste for investors after the company priced its initial public offering (IPO) well below the expected range amid lukewarm interest from potential shareholders.
Overnight, it was reported that the firm has raised around US$500mln in its IPO after pricing 29.4mln shares at US$17 each, much lower than its earlier planned range of between US$21-US$24, valuing the company at US$2.7bn.
Despite the discounted valuation, the company’s is still worth more than the US$1.35bn paid by its previous owner JAB Holdings, which took the sweet treats purveyor private in 2016.
The muted reception for Krispy Kreme’s float may be down to the crowded IPO market in the US, with around 17 companies due to go public this week alone.
The firm may also be hoping for a better first-day performance than Chinese ride-hailing app DiDi Global Inc (NYSE:DIDI), which made its debut on US markets on Wednesday after raising US$4.4bn in an IPO at US$14 per share. The company ended its first session at US$14.14, an increase of just 1%.
However, Krispy Kreme will be hoping British investors will want a second bite of the firm which could boost its fortunes, as the group is planning a secondary listing in the UK once the opening auction is completed later today.
“The US IPO market has seen more than a just a sprinkling of activity in recent months, and although Krispy Kreme may be hoping to strike while the fryer is hot, the IPO price is likely to be viewed by many investors as overcooked. The fact that it has come in well below the bottom of the expected range indicates that initial demand for shares was lukewarm. As with any new offering, there could well be a flurry of interest as soon as trading begins, with customers and retail investors still keen to get a bite of the action”, said Susannah Streeter at Hargreaves Lansdown.
However, Streeter warned that the company’s business could work against it in the long run.
“Timing is everything for an IPO, and this launch comes at a time when the public is becoming more health conscious, particularly following the pandemic where obesity now appears to have been a major factor in cases of severe sickness. With sugar the new ogre, increasingly seen as a threat to long term health, the company has highlighted that it could be vulnerable to future regulation related to diet”, she added.