Profit warning sours candy giant's IPO plans
Published: 13 Dec 2013 15:29 GMT+01:00
Updated: 13 Dec 2013 15:29 GMT+01:00
Investors had been drooling over the chance to buy shares in Candyking, a dominant player in the Swedish market for pick 'n' mix candy, ever since the company announced in November that it planned to list shares on NASDAQ OMX Stockholm exchange.
Shares were due to start trading on Thursday, with the offer expected to bring in 500 million kronor ($75.8 million) to help Candyking expand into new markets beyond the Nordics, the UK, Ireland, and Poland and to reduce its debt levels.
But on Wednesday, the company was forced to issue a profit warning following two fires at supplier factories, increasing production costs and expected to dent fourth quarter results by 3.5 million kronor. At the same time, Candyking said it was "postponing" its IPO to Monday, December 16th, to allow investors time to consider the effects of the warning.
The move left many experts scratching their heads.
"I've never heard of any company ever issuing a profit warning before a stock exchange introduction," Claes Hemberg from Avanza Bank told the TT news agency on Wednesday.
Candyking's planned listing took another unexpected turn on Friday morning, however, when the company announced it was scrapping the IPO altogether.
The company said that while interest from investors had been "strong", uncertainty in the market caused by news of the factory fires prompted owners to cancel the IPO.
"We must in this situation think of the company and the investors that have applied for acquisition of shares. It is not fair to either of the parties involved to begin the journey with Candyking as a listed company with the negative signatures that the latest events have created," Candyking board chair Jan Ohlsson, who is also chair of Accent Equity Partners AB, one of the company's primary owners, said in a statement.
"We note that the company through unfortunate circumstances, beyond our control, did not get the opportunity it deserved on the stock exchange. Our belief in Candyking remains firm and we will therefore continue developing the company outside the exchange.”
"I should be praised," he told the newspaper Svenska Dagbladet (SvD). "I find it difficult to understand the negative press about this in the past few days."
At the same time, Ohlsson conceded that it was highly unusual to issue a profit warning the day before a planned launch. He said he and his colleagues had at first not realized the extent of the fires' effect on the business.
"We didn't see the effects at first, and of course you can criticize us for that," he said.
Candyking does not own any factories itself, rather acting as a pick 'n' mix giant wholesaler in the Nordic region, where people's confectionery consumption has gone up on average 1.2 percent per year since 2002.
"With the exception of Denmark, the confectionery markets in the Nordics have proved to be resilient to GDP swings, which the company believes is primarily a result of confectionery being an impulse-driven and relatively cheap product category," the company writes on its website.
In the wake of its trashed stock exchange plans, however, Candyking CEO David von Laskowski said it had been a turbulent period for the company, adding they came clean as soon as they could.
"As soon as we got the information, we published it," he said.
The Dagens Nyheter newspaper's finance correspondent Pia Gripenberg said the last-minute pullout was utterly unique.
"I've never heard of anything like it," she said. "Companies that pull out of going public usually do it because they've received a better bid from an external buyer."
She said the long-term effect could be reluctance to buy into the company in the future.