Krispy Kreme IPO — The IPO boom continues…
IPO date: 1st July 2021
Stock market debut: Nasdaq Stock Exchange
Ticker symbol: DNUT
Offer price: $17 per share
Shares offered: 29,411,765 shares
2020 figures: Revenue rose 17% to $1.12 billion, but the company reported a net loss of $60.9 million.
Krispy Kreme is popular all over the world for its doughnuts. The company was founded in America in 1937 and rapidly grew into one of the largest and most famous doughnut brands globally. Their main sources of revenue come from the sale of doughnuts and other food and drink, with their most iconic product being the ‘Orignal Glazed’ doughnut. In 2020, it sold 1.3 billion doughnuts across 30 countries. According to Reuters, Krispy Kreme now has roughly 1,400 retail shops in 33 countries and also sells at about 12,000 grocery, convenience and mass merchant stores in the US.
Krispy Kreme has been a public company previously when it listed in 2000 on the Nasdaq Stock Exchange at $21. Five years ago, the company was taken private by JAB Holding, due to significant losses. JAB acquired Krispy Kreme for roughly $1.35 billion in 2016. They will still retain significant influence of Krispy Kreme post-IPO.
Krispy Kreme has expanded in e-commerce which has taken off during the pandemic. In 2018, Krispy Kreme acquired Insomnia Cookies which has helped fuel this part of the business. E-commerce now accounts for a fifth of the firm’s sales in the US.
Krispy Kreme priced its shares below their planned range of $21 and $24. Their shares opened on Thursday afternoon was $16.30 per share, but quickly rebounded later in the day. When the markets closed, the stock was trading for $21 per share. Overall, the shares gained 23.5% on Thursday.
The firm raised $500 million in its IPO and the funds raised in the IPO are likely to be used to develop Krispy Kreme’s e-commerce side of the business and position itself in the market to better face trends of health and fitness.
Krispy Kreme shares continued to trade above its offer price on its second day of trading, hovering around the $19 mark. Since then, the share price has decreased and is now trading at approximately its offer price.
What’s next for Krispy Kreme?
The firm plans to develop the e-commerce side of its business model. For example, two years ago, the firm initiated a delivered fresh daily (DFD) model. This model is part of an omni-channel business model. Bloomreach.com describes an omni-channel business as a multichannel approach to sales that focus on providing a seamless customer experience.
According to City Index, to meet the demands of e-commerce, other features of its omni-channel model include Hot Light Stores and Fresh Shops, Partnerships with retailers, e-commerce and home delivery and Long-life mass merchandise sales. If it continues to develop this side of its business, it is likely this will lead to an increase in revenues for the firm and an increase in its share price.
Moreover, in its IPO prospectus, the firm stated: “Despite our high brand awareness, we have a limited presence in certain key U.S. markets, such as New York and Chicago and have yet to build a significant presence in key U.S. cities, including Boston and Minneapolis.” Krispy Kreme also mentioned that it would like to grow its presence in Europe, Brazil and China. Expansion in other countries around the world in the coming years is likely to be a key determinant of the firm’s growth.
Why has there been an IPO boom?
The global IPO market has also surged this year. In the first six months of this year, a record $222 billion has been raised through stock market debuts, with some of the biggest IPO’s being Coinbase, Coursera, and Darktrace. The market is also showing no signs of slowing down and funds raised are likely to beat a record in 2007 of $420.1 billion.
Last week, 17 companies listed on US stock exchanges. According to Renaissance Capital, this would be the third time in 2021 that U.S. markets saw 17 IPOs, following weeks in February and March. Before this year, this has not happened since 2006. The second quarter of 2021 is expected to go down as the busiest quarter for U.S. IPOs since 2000.
One reason for the IPO boom is that firms are taking advantage of opportunistic market conditions. Tech stocks have boomed during the pandemic and firms such as Darktrace, Squarespace and Vimeo using market conditions to their advantage. Online shopping, in particular, the home furniture market has seen a surge in sales which Made.com and Victorian Plumbing have capitalised on. It is likely that firms will continue to capitalise on trends and opportunistic market conditions which have emerged during the pandemic throughout the rest of this year.