Albertsons IPO Priced Below Expected Range at $16

Analysts see strength in sustained shift to food at home
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After an initial public offering of Albertsons Cos. sold less stock at a lower price than its owners had sought, shares of the Boise, Idaho, retailer were expected to begin trading on the New York Stock Exchange today. 

The stock opened at $15.50 per share but was up over $16 in early trading June 26. Albertsons trades under the symbol ACI.

The IPO sold 50 million shares at $16 per share raising $800 million for its selling stockholders, a consortium led by Cerberus Capital Management, which has controlled the big company for 14 years and had been looking for an exit for at least the past five years. Pricing and investor appetite may have been affected by a choppy market, which dipped sharply earlier in the week on a resurgence of U.S. coronavirus cases, analysts said.

A stock prospectus filed with federal regulators last week contemplated Albertsons selling 65.8 million shares at a price range of $18 to $20. The downsized IPO raised $800 million rather than $1.3 billion it had sought.

Stock analyst Scott Mushkin of R5 Capital initiated coverage of Albertsons with a “buy” rating and a 2020 year-end price target of $24 per share, citing the sustained shift to food-at-home spending sparked by the COVID crisis, clean and well-merchandised stores, and less price competition from discounters such as Aldi and Walmart relative to its conventional peers as factors in its favor. Albertsons is also making progress on digital initiatives, although Mushkin noted that omnichannel expansion comes with economic challenges.

“While the full extent of long-term impacts of COVID-19 and the ensuing economic downturn on consumer behavior is still unknown, our consumer research strongly suggests that there will likely be more food-at-home occasions for an extended length of time. This, in our opinion, will bolster revenues and EBIT dollars for traditional supermarkets like Albertsons,” Mushkin said in a note to clients.


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