What happened?
Levi Strauss & Co. raised $623.3 million in an IPO on Wednesday. The company marketed its shares for $14-$16 each, but due to the high demand was able to sell almost 36.7 million shares for $17 apiece. Market valuation of Levi at the IPO price equals to $6.55 billion.
Why is it important?
In general
The 166-year-old company first went public in 1971, but then was taken private in 1985. The return of such big business to the market means that it wants to adapt and advance and offers others to get aboard in exchange for funding.
Going public may be the trend for big companies in 2019: Lyft Inc. will hold an IPO next week, Uber Technologies Inc. is planning to follow suit during the first half of the year, while Slack Technologies Inc. and Postmates Inc. are also considering the option.
For investors
The results of the initial public offering show that investors are interested in the company. The business is doing fine. In 2018, sales rose by 14% to $5.6 billion, showing the best growth in more than 25 years as demand for denim clothes went up.
The company has been also making an effort to diversify. Going beyond jeans is a very important strategic step as it holds the key to the future of Levi Strauss. Diversification is necessary if it wants to possess the ability to satisfy the ever-changing consumer needs in the future. In addition, the management wants to increase presence in the Chinese market.
Of course, life is not possible without challenges. The global growth slowdown is the first on the list. Next, it may be difficult to conquer China: many companies have failed this mission. Finally, the retailer is still focused primarily on jeans and there are high competition and limited growth potential in this market. To make a conclusion, Levi Strauss looks interesting enough and can be added to a portfolio. Nevertheless, it remains to be seen whether the company is able to put through big changes and achieve new valuation levels.
For traders
The stock starts trading on NYSE today under the ticker “LEVI.” We can assume that everything will be rather lively. There is a big chance that the stock continues to attract demand in the medium term.
