Dutch Bros IPO prices exceed expectations; the shares begin trading on wednesday

Dutch Bros. is about to debut on Wall Street.

The Southern Oregon coffee chain, which drove through the market, traded shares at $ 23 on Tuesday afternoon for its long-awaited initial public offering, $ 3 above the upper end of the forecast range by the company last week.

This suggests that institutional investors were eager to buy the shares and that the higher bid price would increase the amount Dutch Bros will increase from the IPO to more than $ 550 million. The bid price indicates that Wall Street values ​​the business at $ 3.8 billion, making it instantly the seventh most valuable company in Oregon.

Another test awaits you on Wednesday morning, when the shares begin trading on the New York Stock Exchange under the symbol “BROS”. Dutch Bros. will observe if its shares rise above its $ 23 bid price, as is usual in new listings.

The chain of cafes that started with a single cart on the small Grants Pass already has more than 480 stores, ranging from Washington state to Texas. Dutch Bros., which is still headquartered in Grants Pass, aims to one day reach 4,000 stores nationwide.

Wednesday’s offering is Oregon’s first IPO, which has grossed at least $ 100 million since 2004. And it’s the biggest debut in state history, reflecting the high expectations facing Dutch Bros and the US. ‘huge increase in Wall Street valuations in recent decades.

The slowdown in new offerings reflects Oregon’s transition to an advanced economy, with employment dominated by large out-of-state companies, including Intel, Adidas, Daimler, Amazon and Walmart. They all have substantial operations in Oregon, but their corporate headquarters are elsewhere.

While the state’s economy has continued to expand rapidly, some large self-produced companies are now also emerging. Portland vacation rental management giant Vacasa plans to go public later this fall by merging with a publicly traded investment fund.

Dutch Bros. sales grew strongly, up 27% last year, to $ 327 million. But its profits are meager, at just $ 5.7 million in 2020, which obviously reflects the money the Oregon company has spent to fuel its growth.

If this investment is worthwhile Dutch Bros (pronounced “bros”, not “brothers”) could become a major consumer brand, known both nationwide and in its home state, where it enjoys a quick follow-up of devoted customers calling themselves the “Dutch mafia”.

With a menu of smoothies, cold drinks, and high-caffeine energy drinks (Dutch Bros.’s Blue Rebel energy drinks accounted for nearly a quarter of the company’s sales last year), Dutch Bros. is far from a company of traditional coffee. He is proud of his customer service and youthful image.

However, any small business faces obstacles as it grows. Already, Dutch Bros. IPOs have revealed that the business has had problems with its internal accounting, because it has no experienced staff to store the books for an increasingly complex organization.

And Dutch Bros. will face intense competition, from other regional chains and established coffee brands, as it tries to make its way into new markets.

Dutch Bros. plans to use the proceeds of its IPO to pay off nearly $ 200 million in debt and fuel the company’s growth. It will allocate 1% of the money to charitable contributions, which will be paid for ten years.

The public offering makes Dutch Bros co-founder and president Travis Boersma a billionaire, with a 43% stake in the company worth more than $ 1.6 billion in Tuesday’s bid price. However, it controls 74% of voting shares through an unusual structure that gives its shares more voice than those of common shareholders.

– Mike Rogoway | [email protected] | twitter: @rogoway |