Despite a choppy market, Initial Public Offerings (IPO’s) are hot this week as we have counted at least a dozen companies making their debut. The biggest name on the docket is Dunkin Brands (DNKN, $28.04, up $9.04) which priced at $19 on Tuesday after the bell and opened for trading this morning.
The parent of Dunkin’ Donuts and Baskin-Robbins ice cream chains had planned to raise in the ballpark of $375 million by offering 22 million shares at a price range of $16 -$18. Obviously, shares priced above this range and are having a successful showing, up nearly 50%.
We talked about the company’s IPO in our Weekly Wrap on Sunday and mentioned there are more than 15,500 Dunkin’ and Baskin-Robbins stores around the world. There are 71 Dunkin’ Donuts stores in China and room to grow. The company has also signed an agreement to open 500 new stores in India over the next 15 years and it is aggressively pushing into Russia and Ukraine.
Dunkin Brands also makes money by franchising the Dunkin Doughnuts model and they have decent operating margins but our feeling is that the coffee stocks could be ripe for a pullback.
We have loved reporting the news on the way up on many names you already know: Starbucks (SBUX, $39.37, down $0.81) which finally hit our $40 price target, Peet’s Coffee & Tea (PEET, $58.04, down $2.18) which has hit out $60 price target, and Green Mountain Coffee Roasters (GMCR, $89.02, down $3.04) which is pushing $100. We have been telling you their story since the stock was in the $30’s.
Of course, these stocks could continue to go parabolic but at some point they could get whacked. The good news is that since we know these companies so well and the charts, we will know exactly the right time to short them, or buy put options.
With that said, one IPO that could slip under the radar is premium tea retailer, Teavana (Proposed Symbol: TEA) which will price after the bell. The company plans to raise roughly $100 million by offering 7 million shares at a price range of $13 to $15.
Teavana offers premium tea products and could do well as investors overlook this name to get into Dunkin Brands. Shares will likely start trading on Thursday.
As far as the market, it has tested our lower-end targets today, which we expected, and we have bounced a little off the lows. The good news is that the charts have been right on calling this market. This has helped keep our emotions in check as the circus in Washington reaches its high wire act.
Although there seems no resolution in sight, the market will turn on a dime, if and when, Congress announces some sort of progress on the debt-limit. We are hopeful something gets done by Friday as the bulls try and hold support.
As we head to press, the Dow is down 114 points to 12,387 while the S&P 500 is down by 18 points to 1,313. The Nasdaq is getting slammed for 50 points and is at 2,790.
We will be back in the morning with our next update but we have 2 NEW TRADES for our Daily publication which we are releasing right now! Subscribers, check for the updates.