Dunkin Brands’ IPO Wows in First Day of Trading
Shares of Dunkin’ Brands (NASDAQ:DNKN) are now trading at a 44% premium from their opening price of $19 a share. The operator of Dunkin’ Donuts and ice-cream chain Baskin-Robbins had priced its stock offering at $19 a share late Tuesday, above its guidance on official filings of $16 to $18 a share. Dunkin’ Brands offered 22.3 million shares in its return to the public market after being taken private in a leveraged buyout by private equity groups.
Dive Deeper into Dunkin’s Stock: Dunkin’ Brands: A Deep Dive Into the Highly Anticipated IPO.
The big question early investors still face is how well Dunkin’ Brands will fare in an IPO market that is crazed for tech stocks, but doesn’t seem to have much love for more traditional bread and butter businesses. Web 2.0 brand names LinkedIn (NYSE:LNKD), Yandex (NASDAQ:YNDX), Pandora (NYSE:P), and Zillow (NASDAQ:Z) have all issued successful IPOs this year, though there are sparse example of non tech companies that have performed comparably in 2011.
Dunkin’ is off and running on a great start, and the company hopes to keep investors coming back for more with its plans for future expansion. Dunkin’ management has more ambitious plans to follow its public offering, as the company will look to double its store locations over the next twenty years, increasing its presence in many areas currently represented by competitor’s McDonald’s (NYSE:MCD) — which is now focusing on healthier food — and Starbucks (NASDAQ:SBUX), but lacking in Dunkin’ Brands stores. One such region is the Western U.S., where the company operates less than 2% of its total stores.
While Dunkin’s revenues grew 9% in the first quarter this year, same store sales growth was just under 3%, and the business reported a net loss due to rising interest costs on its liabilities. Debt is still a major burden on Dunkin’ Brands income statements, as current owners Bain Capital, Carlyle Group, and Thomas H. Lee Partners used debt financing to fund the majority of their $2.4 billion dollar buyout in 2006. Most of the cash proceeds from the IPO will be directed towards paying off a portion of that outstanding debt.