Dunkin’ Donuts (NASDAQ:DNKN) has announced on Friday that they will be holding a second public offering that they believe could bring in $778.8 million, which would be worth than its initial public offering back in July of last year. The company will offer 26.4 million shares, priced at $29.50 as the market picks up and room for growth is seen.
Last year, during the company’s initial public offering, they offered up 25.6 million shares at $19 a share and they raised almost half a billion dollars. The main underwriters for the IPO were JP Morgan, Barclays, Morgan Stanley and Bank of America.
Only a select few investors will be able to participate in this second offering but it is important to note that the company is not selling any new shares. Dunkin’ wanted to take advantage of the raging IPO market but the IPO market has since slowed down a little bit with the improving conditions over in Europe and a rallying US market.
Dunkin’ Donuts has not fully expanded into the western part of the US, which represents a great growth opportunity for the company to expand its brand.
Personally, I think it’s better for Dunkin’ to avoid the IPO market again. The past few months have showed us that IPOs are getting unfair evaluations even if they haven’t made a profit yet. I do not want to see Dunkin’ get into an overvalued state just because it went through another public offering.
Not to mention, some of these IPOs tend to sell under their initial price anyways once investors come to their senses and realize that the stock is not worth the valuation. Groupon is a great example. The company went IPO in November at $15 a share. Currently, it trades at a 26% discount to that price.
Despite this, Zynga issued a second offering this week which caused the stock to rise 5% on Thursday. Zynga has turned a profit thought and I think with their recent purchase of OMGPOP they could easily produce more profits and further expand their portfolio of mobile games.
The bottom line here with Dunkin’ Donuts is that they are looking to finally expand out west and you need money to open new stores. This will greatly increase growth and value if they put a Dunkin’ in San Francisco, Seattle, Los Angeles, San Diego, etc. This is a huge opportunity for Dunkin’ but I would like to see them find a source of money that is not the public offering market.