Sprouts IPO the Biggest First-Day Gain in Two Years

Sprouts IPO the Biggest First-Day Gain in Two YearsNew York – Sprouts Farmers Market, Inc. (NASDAQ:SFM) more than doubled in their debut on Thursday; making it the biggest first-day gain for an IPO in two years.  The launch helped the natural and organic food chain to raise about $ 333 million.  Of the 18.5 million shares offered almost early investors bought 17.7 million, also the banks managing the IPO have an option to buy another 2.8 million shares adding another $ 50 million in proceeds.  The chain announced they will use the funds to pay down debt and for general business purposes.

Founded in 2002, Sprouts operates more than 160 stores in eight states and has sales of close to $ 2 billion in 2012.  According to sources, the company has the potential to open at least 1,200 more stores under its current structure.

The company is just the latest supermarket chain to go public, in April, New York grocery chain Fairway (NASDAQ:FWM) started trading on the NASDAQ, and Whole Foods Market (NASDAQ:WFM) has been a publicly traded company since 1992.  The reception for Sprouts has also increased speculation that Wegmans might eventually consider going public after resisting the move for years.

Demand for organic foods has grown in recent years as people become more aware of soaring obesity, and latest diet trends like juicing have boosted sales of produce and more healthy food options.

Nevertheless, Whole Foods Market is not worried about losing its lead in natural foods as Sprouts has been a competitor in places like places like Southern California for years.  According to Whole Foods CEO, Walter Robb, ‘we love competition, it makes us better as we get to respond and innovate and grow.  So bring it on.’  Even though the company announced a 19 percent increase in third-quarter earnings on Wednesday, shares of whole foods were down nearly 1 percent in heavy trading on Thursday.

Sprouts which is based in Arizona, is backed by private equity firm Apollo Global Management, which did not sell any shares in the offering and will keep a 45 percent stake post-IPO company.  According to market intelligence agency Pire, the strong performance on Thursday placed the Sprouts IPO as the best performing market debut for the year so far.

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About the author

Audrey is a senior editor for the business and finance sections.