Yeti Holdings Considering Funding Options That Could Delay IPO
October 26 2016 - 12:40PM
Dow Jones News
Yeti Holdings Inc., the maker of a popular line of coolers and
coffee mugs, is weighing various options to raise funds privately
that likely would push back the company's highly anticipated
initial public offering until next year.
The company, which filed for an IPO in July, is currently
weighing an equity sale to a select group of investors or the
issuance of debt to finance a dividend payment to its current
owners, according to people familiar with the matter.
Yeti was planning to seek a valuation of around $5 billion in
the coming IPO, which was expected as soon as this fall, The Wall
Street Journal has reported. But as the Austin, Texas-based company
was preparing to go public, investors approached advisers to Yeti
and its private-equity backer, Cortec Group, about buying a stake
in the company before the offering.
A private fundraising or debt issuance could be attractive to
Cortec because it would allow the firm to reap an immediate payout.
Owners that elect not to sell at the time of the IPO are typically
precluded from selling shares until at least six months after the
offering. In a regulatory filing, Yeti said the proceeds from the
offering would be used to pay down debt or for general corporate
purposes.
The company hasn't started marketing an equity or debt deal, and
one may not materialize, the people said.
Yeti's delayed listing is the latest setback for the sleepy IPO
market, which is struggling to compete with a deluge of private
investment and cheap debt that is allowing startups to avoid the
public markets for longer.
Some 95 companies raised $18.5 billion in new U.S. listings so
far this year, according to Dealogic. At this time last year, 157
companies had raised $34 billion in U.S. IPOs. With investors
hungry to find high-growth stocks, the small cohort of companies
that have made their debuts this year have generated significant
interest. IPOs from this year are up 28% on average, according to
Dealogic.
The additional time before an IPO could allow Yeti's management
team more time to prepare for the scrutiny of a public listing and
quarterly financial reports. Yeti's chief executive, Matt Reintjes,
and its chief financial officer, Richard Shields, joined the
company in September 2015 and November 2015, respectively.
Cortec, which bought a roughly two-thirds stake in Yeti in 2012
for about $67 million, is expected to generated a sizable return on
its investment. At an IPO valuation of $5 billion, its stake in
Yeti would be worth about $3.3 billion on paper, the Journal
reported. That is on top of a $312 million dividend payment Yeti
paid the firm earlier this year, according to a regulatory
filing.
Public investors struggling to fill holes in their portfolios
were looking forward to the Yeti IPO. While they are typically
considered among the riskiest equity investments because of their
shorter record, IPOs offer investors a chance to beat market
benchmarks by investing in growth stocks in the early days.
But the public markets are facing stiff competition from private
investors, including big mutual funds, venture-capital firms and
companies that want to invest before an IPO. Home-rental company
Airbnb Inc., for example, recently raised $850 million from backers
including Alphabet Inc.'s investment arm in part to relieve the
pressure to go public, according to people familiar with the
matter.
Companies often seek out these investors when they're still
private because it makes it easier to attract long-term investors
in a public listing.
Yeti, founded by Texas brothers Roy and Ryan Seiders a decade
ago, has grown quickly in recent years as its coolers and drinkware
gained mass-market appeal.
The company's sales more than tripled in 2015 to $469 million,
according to a regulatory filing. The company's stainless-steel
mugs were a hard-to-find holiday gift item in 2015, and its ice
chests are so popular they have become a favorite among
thieves.
In the public markets, the performance of hotly anticipated
companies has been mixed. The shares of action-camera maker GoPro
Inc. soared after the action-camera maker's 2014 IPO but have since
fallen sharply on worries that consumer interest in its product was
waning.
Yeti lost $38.2 million in the first quarter as expenses for
selling and general and administrative purposes rose to $149.8
million from $13.9 million in the year-earlier quarter, according
to a regulatory filing. Igloo Products Corp., Coleman Co. and
others have introduced new coolers with features similar to Yeti's
at lower prices.
Write to Maureen Farrell at maureen.farrell@wsj.com and Matt
Jarzemsky at matthew.jarzemsky@wsj.com
(END) Dow Jones Newswires
October 26, 2016 12:25 ET (16:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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