Data Driven

Fred Gallagher

Is it Baby IPO or…an IPO, Baby!

mead1Mead Johnson priced the company’s IPO last night, at the top end of the range. The $720 million equity issue trades on the New York Stock Exchange under the ticker MJN, and ended the first day of trading up 10%.

Wow! This is the first IPO of this size in almost a year. Impressive that the company convinced investors to separate from their cash for shares. The company makes baby formula.  Safe bet for investors, as people will spend money to feed the babies, even in a recession.

Don’t expect a flood of offerings in the coming weeks or even months. The IPO pipeline is dry. My bet is we see companies access the debt capital markets and traditional bank financings before we see a great deal of activity in the equity markets. Low interest rates will draw companies to minimally refinance their existing debt, and investors will find that corporate debt returns attractive relative to treasuries which are close to zero. This financial crisis initiated with a freeze in the credit markets, only when these credit markets open will we see a flattening and eventually a recovery.

Nonetheless, congratulations to Mead Johnson and their new shareholders.

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