Please ensure Javascript is enabled for purposes of website accessibility

This Big IPO Turned Out Sweet After All

By Dan Caplinger - Updated Jul 1, 2021 at 5:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A customer favorite returned to the public markets on Thursday.

The bull market in stocks has prompted many companies to ponder initial public offerings. Plenty of those companies have never before had their shares listed on stock exchanges, but as investors were reminded on Thursday, the list of recent IPOs also includes companies that used to be publicly traded but had gone private before deciding to return to exchanges.

One of the more interesting IPOs the market has seen lately happened on Thursday. Despite some fears that the reception for this restaurant giant might not be as warm as its baked goods, in the end, things worked out pretty well. Below, we'll talk more about what happened to this IPO stock and what it means for the future.

How stocks fared on Thursday

The stock market started the second half of 2021 on a positive note. The Dow Jones Industrial Average (^DJI 0.00%), S&P 500 (^GSPC -0.16%), and Nasdaq Composite (^IXIC 0.00%) were all higher on the day, with the S&P finishing at a new record close.

Index

Percentage Change

Point Change

Dow

+0.38%

+131

S&P 500

+0.52%

+22

Nasdaq Composite

+0.13%

+18

Data source: Yahoo! Finance.

Krispy Kreme is back!

The IPO of the day was Krispy Kreme (DNUT -0.83%), which returned to the markets after a five-year hiatus. The stock ended the day at $21, up 24% from its IPO price.

The Krispy Kreme IPO process involved an above-average amount of drama. The doughnut maker had initially hoped to price its offering between $21 and $24. But the company's underwriters weren't able to drum up enough investor interest in that range. As a result, Krispy Kreme ended up cutting the IPO price to $17 per share, selling a bit over 29 million shares to raise roughly $500 million in the offering.

Child eating donut somewhat messily.

Image source: Getty Images.

The start of public trading was even more difficult for Krispy Kreme. The stock didn't trade until nearly 1 p.m. EDT, and its opening price of $16.30 was below the IPO price. But it didn't take long for some excitement to build about the restaurant chain, and the stock pushed above the $17 mark just minutes after it began to trade on its way to a solid first-day result.

A nice win for private equity

When companies that went private return to the markets through an IPO, the first question investors should ask is how the private equity buyer fared. Europe's JAB Holding purchased Krispy Kreme back in 2016 for $1.35 billion, and even the somewhat disappointing IPO price valued the company at around $2.8 billion -- double what JAB paid for it.

To be clear, though, JAB hasn't come close to exiting its position in Krispy Kreme entirely. The IPO involved only a relatively small percentage of Krispy Kreme's outstanding shares. JAB will retain roughly three-quarters to four-fifths of the company's total stock.

It'll be interesting to see how Krispy Kreme fares in the days and weeks to come. The doughnut maker saw its stock soar in the years following its 2000 offering, only to give up much of those gains as hype surrounding its doughnuts started to fade. Investors looking for a sweet deal will have to look forward to hearing Krispy Kreme's first quarterly report on how its business is performing.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Krispy Kreme Doughnuts, Inc. Stock Quote
Krispy Kreme Doughnuts, Inc.
DNUT
$14.35 (-0.83%) $0.12
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,726.82 (0.00%) $0.00
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,145.19 (-0.16%) $-6.75
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$12,720.58 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.