Shares of Kenvue, the consumer arm of healthcare giant Johnson & Johnson, jumped on its first day of trading after a massive initial public offering that marked the the largest list in the United States in almost 18 months.
The spun-off company sold $3.8 billion in shares at a price of $22 per share, with an initial stock valuation of $41 billion. The stock was up 16% to $25.57 as trading began on the New York Stock Exchange at noon Thursday.
The deal is the largest since IPO by electric vehicle maker Rivian in November 2021, and alone will double the amount raised in traditional US listings this year.
Kenvue manufactures over-the-counter drugs and brands such as Tylenol pain relievers, Listerine mouthwash, and Aveeno skin care products. It reported revenue of $15 billion and pro forma net income of $1.5 billion in 2022.
It also makes J&J’s baby powder products, which have been the focus of years of legal battles over whether they cause cancer, and the new company has already come under fire in lawsuits. J&J could not be reached immediately for comment on Kenvue’s offer.
J&J, which will continue to own more than 90 percent of Kenvue’s shares, has agreed to protect Kenvue from any legal costs related to the sale of baby powder in the United States and Canada. However, Kenvue cautioned in its prospectus that it “cannot assure” investors that indemnity from its parent company would be sufficient, and is also facing complaints related to sales in other countries.
The US IPO market has been mired in one of its own longer delays in decades since early 2022 thanks to a combination of rising interest rates, volatile stock markets and pessimistic economic forecasts. Prior to Wednesday’s deal, just $2.4 billion had been raised through traditional IPOs this year, according to Dealogic data.
Kenvue is unusual among IPO candidates in that it is profitable, backed by a large group of parents, and expected to pay a $1.5 billion annual dividend. Therefore, most bankers don’t expect it to trigger an immediate wave of further listings, but the deal is still being watched closely by Wall Street as evidence of investor confidence.
“It’s pretty idiosyncratic, but . . . I think that’s a good sign,” said a senior bank executive who did not work on the deal.
Goldman Sachs, JPMorgan Chase and Bank of America were the major underwriters of the listing.
Inflammatory disease specialist Acelyrin is set to provide further testing for the beleaguered stock market in the coming days with the biggest biotech IPO since June 2021. It is looking to raise up to $477 million at a valuation of up to $1.6 billion.
The biotech sector has been particularly hard hit by the IPO freeze, as early-stage companies rely on stock sales to finance lengthy and expensive drug developments.
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