Summary: Kenvue's brands include well-known Tylenol, Neutrogena, Band-Aid, and Listerine, as well as Johnson's baby powder. Prior to the IPO, Johnson & Johnson owned 100% of Kenvue, retaining 91.9% after the offering, which will drop to 90.8% with full dilution. However, J&J plans to sell the remaining shares later in 2023. Market analysts believe this IPO is not enough to ignite enthusiasm in the US IPO market.
The largest US IPO in a year and a half arrived Thursday, May 4, as Johnson & Johnson's wholly-owned consumer health subsidiary Kenvue went public in the United States. Kenvue's shares opened at $25.53 and continued to rise, reaching an intraday high of $26.45, up 20% at one point.
The day before the IPO, on May 3, Kenvue announced an expanded offering size, issuing 172.8 million common shares at $22 each in the IPO, raising an expected $3.7 billion. At the IPO price, Kenvue's valuation reached $41 billion, making it the largest US IPO since Rivian's debut in November 2021.
Kenvue's common stock was approved for listing on the NYSE under the symbol "KVUE," with trading commencing on May 4. The IPO was underwritten by Goldman Sachs, J.P. Morgan, and Bank of America.
According to an earlier filing with the Securities and Exchange Commission (SEC), Johnson & Johnson owned 100% of Kenvue before the IPO, with ownership dropping to 91.9% post-IPO, or 90.8% if fully diluted. However, J&J plans to sell its remaining shares later in 2023.
The company is profitable and expects steady revenue growth. Kenvue's primary businesses include skin health and beauty, essential health, and personal care. Brands include well-known Tylenol, Neutrogena, Band-Aid, and Listerine, as well as Johnson's baby powder. Competitors include Procter & Gamble, Bayer, and Sanofi's consumer health divisions.
Kenvue disclosed revenues of $14.95 billion in 2022, with operating profits of $2.675 billion and net income of $2.087 billion. The company expects moderate growth in the coming years.
Kenvue's IPO marks the largest restructuring in Johnson & Johnson's 135-year history. J&J announced the spin-off in late 2021 to streamline operations and refocus on pharmaceuticals and medical devices. However, J&J faces thousands of allegations related to products like its baby powder, which consumers suspect causes cancer. According to the January IPO filing, Kenvue will only assume liabilities outside the US and Canada.
The Kenvue IPO may not signal a resurgence in the US IPO market. Since the beginning of 2022, the Fed's aggressive rate hikes have caused the longest slowdown in decades for the US IPO market. Data from Dealogic shows that before Wednesday's trading, the total funds raised through IPOs (excluding SPACs) this year amounted to only $2.35 billion, down 22% year-on-year. This year is the worst since 2009 for traditional IPOs in the US, even weaker than last year's performance.
Kenvue's unique position as a profitable company supported by a giant parent company and planning to pay a $1.5 billion annual dividend may not immediately stimulate more companies to go public , according to most analysts.
Unlike Kenvue, many potential IPO candidates lack the backing of a large parent company and may not have a clear path to profitability. As a result, Kenvue's successful debut is unlikely to trigger a wave of new listings in the US IPO market. Analysts believe that other companies may continue to take a cautious approach and wait for more favorable market conditions before pursuing an IPO.
Moreover, the current interest rate environment and ongoing economic uncertainties may deter some companies from going public. The aggressive rate hikes by the US Federal Reserve have led to increased market volatility and higher borrowing costs, which may dampen the appetite for IPOs in the near term.
In conclusion, while Kenvue's IPO marks a significant milestone and a positive development for the company, it may not necessarily indicate a resurgence in the US IPO market. The overall market conditions and individual circumstances of other companies will likely play a more significant role in determining the pace of IPO activity in the coming months.
