Doughnut roller coaster: Krispy Kreme shares up after smaller IPO

Krispy Kreme Inc’s shares soared in their first day of trading, giving the doughnut chain a much-needed lift a day after it was forced to downsize its initial public offering.

The stock reversed an early decline to jump as much as 26% to $20.58 a share Thursday in New York. The Charlotte, North Carolina-based company, which is owned by investment firm JAB Holdings BV, opened at $16.30, below the $17 IPO price.

The roller-coaster debut reflects the volatile environment for restaurants as the pandemic subsides. Many U.S. eateries, particularly those focused on breakfast, faced a difficult period of store closures and reduced sales as Covid-19 led Americans to eat more at home.

Krispy Kreme Chief Executive Officer Michael Tattersfield downplayed the stock’s early performance, saying he was focused more on the investor base than the stock price.

“How I measure it is a little different — when you look at who is the quality of the investor that you brought on in your IPO,” he said in an interview. He said Krispy Kreme has attracted long-term holders, including sovereign wealth funds.

More than $20 billion of IPOs have begun trading in the U.S. this week, one of the biggest weeks ever. Didi Global Inc., a Chinese ride-hailing company, started trading Wednesday after raising $4.4 billion in the second-largest Chinese listing in the U.S. on record.

Krispy Kreme on Wednesday raised $500 million in its IPO, short of the $640 million it had sought. The company had initially marketed the shares at $21 to $24, according to a listing document filed with the U.S. Securities and Exchange Commission.

The shares rose 22% to $19.89 at 3:07 p.m., giving the company a market value of about $3.2 billion, according to Bloomberg’s calculation.

International Expansion

Krispy Kreme is aiming to add 1,000 points of sale every year, including stores, grocery cabinets and convenience-store spaces, Tattersfield said.

The company sees “significant” room for growth both in the U.S. and internationally, the CEO said on Bloomberg Television. Brazil, China and Western Europe are under consideration for growth.

“There’s 150-plus countries that we’re not in,” he said. “So it’s not about putting a flag in another country. It’s the discipline of doing this right.”

JAB acquired Krispy Kreme in 2016 in a $1.35 billion deal to take it private. JAB, an investment vehicle for the Reimanns, one of Germany’s wealthiest families, has expanded aggressively in restaurants and beverages and controls Pret A Manger and JDE Peet’s.

Krispy Kreme has expanded in e-commerce, a service that fared well during pandemic lockdowns. That part of the business now accounts for close to a fifth of sales in the U.S., fueled by its Insomnia Cookies delivery concept.

Doughnut Gifts

Tattersfield said the company doesn’t just compete with other restaurants or sweets makers.

“You compete at times with the flower business. On Mother’s Day, the children would rather give their mothers sometimes doughnuts,” he said. “It’s a very different business model that doesn’t necessarily compete just in the food space.”

Krispy Kreme’s offering was led by JPMorgan Chase & Co., Morgan Stanley, Bank of America Corp. and Citigroup Inc. The shares are trading on the Nasdaq Global Select Market under the symbol DNUT.