The Container Store Group Inc (NYSE:TCS) saw its share price double today in its first day of trading, hitting $36.74 from the initial price of $18, reports William Alden at The New York Times. The company raised $225 million at its IPO and has a valuation of $828 million.
Leonard Green stakes in Container Store
The Container Store Group Inc (NYSE:TCS) has been around since 1978, but it was acquired by private equity firm Leonard Green & Partners in 2007, and the firm still holds a 60% stake in the company. Aside from owning a newly valuable stock, Leonard Green and other preferred stock owners will be getting a dividend in the near future according to the company’s prospectus.
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Revenues were up 11.5% for the fiscal year ending in March, but the Container Store Group Inc (NYSE:TCS) has actually seen sales growth slow this year and reported a net loss because of common shareholders.
Container Store’s IPO
It’s still just the first day of trading, so it won’t be strange if prices fluctuate a bit before the market settles on some valuation, but clearly the company could have gotten more out of its IPO if it had raised the initial price a bit. Once the stock price does settle down, investors looking to buy and hold will have to ask themselves what competitive advantage the Container Store Group Inc (NYSE:TCS) really has over more general retailers like Wal-Mart Stores, Inc. (NYSE:WMT) or Amazon.com, Inc. (NASDAQ:AMZN). For now, the company is able to differentiate itself on the quality and depth of its niche merchandise, not to mention companies like Ikea that serve a similar part of the market.
Part of the appeal could just be the incredible consistency from store to store. Describing his “soul-sucking experience” working for the stores more than ten years ago, Rocco Pendola at The Street says that he thinks it’s this familiarity that is appealing to customers, in the same way that you know exactly what you’re going to get at any McDonald’s in the country.
Anyone who bought shares at the IPO has already turned a nice profit, but people investing today had better hope that the company returns to its strong growth numbers from last year or this could be another successful IPO that leaves retail investors with some buyer’s remorse.