You've always been able to buy yourself a new pair of Levi's jeans, but the last time you were able to buy Levi's (LEVI -0.56%) shares, Reagan was still in the White House and Madonna's "Crazy for You" was riding high on the Billboard charts. On March 21, it returned to the markets, and word at the time of our taping the day before was that its offering price would fall between $14 and $16 a share, which would have raised about $500 million at the midpoint. Turned out, $17 a share was the number.
But that didn't in any sense change the lens for the simple question that MarketFoolery host Chris Hill posed to MFAM Funds' Bill Barker in this segment of the podcast: Invest early or take a wait-and-see approach? Barker, it turns out, is not crazy for Levi's IPO, and he'll talk about why.
A full transcript follows the video.
This video was recorded on March 20, 2019.
Chris Hill: Levi's is going public. The well-known jeans brand, which was public once upon a time, taken private in 1985. Levi's is pricing the stock at a range of $14 to $16 a share. In doing so, assuming they hit the midpoint of that range, they're going to raise just north of $500 million. Speaking of challenged industries, we'll go ahead and put apparel on that list as well. This is a well-known brand. This is, I think, a company that has some brand equity and has some things going for it. But it's in a tough space. All things being equal, I'm wondering if Levi's is an IPO that you're interested in, or you're just going to put on the back burner and see how the first couple of quarters go?
Bill Barker: Definitely on the back burner. When Levi Strauss, one of the founders of the company, died, I think his estate was worth -- this is the early 1900s -- around $3.5 billion by today's measurement, inflation adjusted. Did very well for himself. Left the money to his nephews. He didn't have children of his own. The company now, worth about $5 billion. I'd like to see a lot more of the math, but I don't feel that the compounding, keeping up and more than beating inflation...look, his estate is not the same thing as the company. The company's done different things over the years. People have taken money out and spent it. The family is -- one of the reasons why they're bringing the company public is, the controlling interest is still the descendants of Levi Strauss. They will in part cash out through this IPO, but will also retain majority ownership. You've still got the family controlling the brand. Some people like that founder-run...it's not really founder-run at this point. I'd want to see the actual numbers here.
Hill: In looking through the prospectus, here's one of the things that I'm just going to go ahead and call a red flag. The company states in their perspectives that their brand, and I'm quoting here, "epitomizes classic, authentic American style and effortless cool." That phrase, "effortless cool," shows up four times in the prospectus. I'm just going to gently suggest to the people doing communications at Levi's that if you're putting that much effort into telling people that you have effortless cool, you don't, actually. Just put aside that as a selling point and focus on the business.
Barker: They also have Dockers.
Hill: [laughs] Yes.
Barker: [laughs] That was sort of what Dockers was always going after, wasn't it? I don't know if "cool" would be the first word that would come to mind, but, the old Dockers commercials, which inspired one of the better Saturday Night Live commercials, which is something we sometimes come back to, Bad Idea Jeans. Remember that one?
Hill: Classic commercial. An all-time great commercial from Saturday Night Live.
Barker: Inspired by the Dockers commercials of that era, which involved this waist-down portrayal of, I don't know what the guys in those commercials were doing --
Hill: Just sitting around, talking.
Barker: Sitting around, being effortless.
Barker: And if we got the full view of them, perhaps we would say, "Oh, those guys seem pretty cool." That was what the ads were going after. [laughs]
Hill: [laughs] Good luck to Levi's! We'll just end on that.