Although IPOs tend to be terrible first-day buys; retail investors seem mesmerized by them.
The interest in Facebook (NASDAQ:FB) was off the charts, and Manchester United’s proposed $100 million IPO is getting a fair bit of media play despite the fact the offering does little to improve the team’s fortune beyond paying down a small amount of debt. It’s a loser with a capital “L,” and yet soccer fans across America will be buying the stock within the first few days of trading.
I’m not a soccer fan, but it got me to thinking about some of the privately owned household names I would like to see go public:
Mars Inc.
Hightable.com produces a very colorful graphic of America’s 20 largest private companies. Of the group, two hold some interest — Mars Inc. and Publix Super Markets Inc.
Mars is best known for chocolate bars like the namesake itself, Milky Way, Snickers and M&M’s. Two interesting tidbits about the company: First, the M&M stands for Mars and Murrie; Murrie being the son of the former Hershey (NYSE:HSY) president William Murrie. Secondly, up until 2007, its Mars Canada division was known as Effem Inc. and before that, Effem Foods. Effem (Eff-Em) stands for Forrest Mars, the son of the founder of the company.
Of course, Mars is so much more than just chocolate. It also owns food brands like Uncle Ben’s, pet care brands like Whiskas, Alterra Coffee Roasters and Wrigley, which it bought for $28 billion in 2008. As a kid, I used to walk over to Wrigley’s Canadian head office and ask all kinds of questions just so I could get free gum at the end of my visit. This is a company with $30 billion in revenue and known all over the world. The push to own its stock would be almost as great as Facebook.
Publix Super Markets Inc.
According to a survey of 24,203 readers of Consumer Reports, America’s third-favorite grocery chain in terms of service, quality of produce and meat, price and cleanliness is Florida-based Publix. With 1,053 supermarkets in five states doing $27 billion in annual revenue in 2011, it has made its way to the top by offering great service and clean stores. Only Trader Joe’s and Wegmans rated higher.
My parents spend the winter in Florida, and they’re always disappointed when they come back to Canada and our own boring grocery stores. Publix is owned by employees and members of the Jenkins family, who founded the company back in 1930. Because of its size and the number of shareholders, Publix is required to file financial reports as well as a proxy with the SEC. Thus, if it ever were to go public, it would be a relatively easy task to get it ready to file.
In the most recent quarter ended March 31, Publix’s revenues increased 4.2%, same-store sales were up 3.3% and operating income 4.8%. The board valued its shares at $22.70, or $17.9 billion total, this past quarter. That gives it a price-to-sales ratio of 0.66, significantly higher than both Safeway (NYSE:SWY) and Kroger (NYSE:KR). Grocery-store stocks are getting pounded at the moment, so now’s not a good time, but maybe someday in the future.
L.L. Bean
I’m currently in the middle of reading Tony Hsieh’s book Delivering Happiness: A Path to Profits, Passion, and Purpose. Hsieh (pronounced Shay) runs Zappos.com, now owned by Amazon.com (NASDAQ:AMZN). His company is relentless about customer service. I’d love to see it go public, but since Amazon paid almost a billion for his company, I’m pretty sure they’ll hang on to it.
Another company that believes in treating the customer right is L.L. Bean, the Maine retailer of quality apparel and outdoor equipment since 1912.
Its founder, Leon Leonwood Bean, had a golden rule: “Sell good merchandise at a reasonable profit, treat your customers like human beings and they will always come back for more.” Oh, and he also provided a 100% satisfaction guarantee for everything he sold. That stands today. Send back a 10-year-old pair of boots, and they’ll make it right.
Not treating the customer like a criminal (you’d be surprised how often that happens in retail), L.L. Bean has been able to take its retail stores on the road. It now has 18 outside of Maine, with more to come. In its 100th year as a customer service superstar, its IPO would be very well received.
New Belgium Brewing Company
The economy is a big deal these days, as unemployment continues to run high. Businesses for the most part aren’t creating jobs. A great exception is the craft beer industry, which is growing like flying fur in a five-cat household.
Colorado’s New Belgium Brewing Company, maker of Fat Tire and many other tasty brews, is building a $175 million state-of-the-art brewery in Asheville, N.C., that will result in 154 new jobs by 2020. It might not sound like a lot, but if New Belgium, the third-largest craft brewer in America, continues to do well, the benefits to the region will likely be much greater than that.
With craft beer continuing to take market share from behemoths like Anheuser-Busch InBev (NYSE:BUD), New Belgium or Sierra Nevada IPOs would be very frothy indeed.
Tory Burch
My last selection would have to be Tory Burch, the women’s clothing line started in her apartment back in 2004. Now with 73 stores in the U.S., Canada and elsewhere, it appears an IPO could be as successful as Michael Kors (NYSE:KORS), which is up 95% since going public last December.
With revenues of approximately $800 million thanks in part to an appearance on Oprah in 2005, it started making money within the first year. Focusing on opening new stores in 2012, $1 billion in revenue should be attainable by 2015.
Already popular because of her clothing and other products, Burch has set up a foundation to provide micro-loans to female entrepreneurs in America. By the time the IPO comes along, I’m sure the foundation will be as well known as the brand. She’s definitely someone to admire.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
