NYT article about Krispy Kreme insiders' plans to sell some of their shares.
(For me, the most interesting detail in the article was hearing that Krispy Kreme is yet another example of a great company that was sold to a large company (Beatrice Foods), which then immediately proceeded to nearly ruin everything.
And then, KREM was bought back from Beatrice (presumably at a lower price than the recent sales price) by the "rightful" owners & operators of the company).
Another example of this that comes to mind was Charles Schwab & Co. (bought by Bank of America, run into the ground, and then re-purchased by Charles Schwab (the person)).
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January 14, 2001
Insiders' Stock Plans Weigh on Krispy Kreme
By JANE TANNER
WILL the Krispy Kreme Donut
Corporation, the second- hottest initial
stock offering of last year, go the way
of Starbucks? Or will it fizzle, as have so many
other trendy chain concepts? Like Starbucks,
Krispy Kreme rocketed after its public debut.
From a start of $21 on April 5, it hit a high of
$108.50 on Nov. 2.
Krispy Kreme executives and some analysts
expect the brand to become more widespread as
the company expands in the United States and,
under plans announced on Jan. 2, pushes into
Canada.
But since the company's announcement three
days later that it plans to sell as many as 2.3
million additional shares, mostly from a top
executive and franchisees, the stock has dropped nearly 15 percent, to
$67.31. And some analysts expect the stock to fall further.
In the secondary offering, only 150,000 of the shares will be newly issued;
2.15 million will come from insiders, including 264,000 from the vice
chairman, John N. McAleer, and his family. "When longtime stockholders
sell, it puts a cap on the valuation," said Greg Schroeder, restaurant analyst at
Josephthal & Company. "When insiders are selling, no one wants to buy the
stock."
The current sale gives longtime franchisees and their families a chance to
cash out after generations of loyalty to Krispy Kreme, the popular doughnut
chain that opened in 1937 in Winston-Salem, N.C., where the company is
based.
Mr. McAleer's father, Joseph McAleer Sr., led a franchisee buyout of Krispy
Kreme from Beatrice Foods in 1982 after Beatrice's short but disastrous
period of control. The list of selling shareholders now reads like a McAleer
family tree.
Some analysts expect that sales growth will slow and that the positive media
attention the company has received will wear off. They attribute the stock's
early rise in part to the small amount available for trading — only 3.45 million
shares in the initial offering last April, out of a total of 13 million. But this
April, restrictions on insiders' ability to sell an additional 7.6 million shares
will be lifted.
Other news has given investors pause. On Dec. 7, Margaret Urquhart,
president of the company's United States operations, resigned after less than
a year. The company says she left for personal reasons and will remain a
consultant.
Analysts said such a short tenure was unusual for someone whose record
was good, and questioned her departure terms. According to a filing, Ms.
Urquhart received $740,000, plus $285,000 a year for the next two years,
plus options to buy 150,000 shares at $21 that vested immediately at her
resignation. Before joining Krispy Kreme, she was president of the Lowes
Food grocery chain. Neither she nor the company would comment.
Scott A. Livengood, 48, chairman and chief operating officer, took over Ms.
Urquhart's responsibilities. Mr. Livengood is not overburdened, analysts said,
because expansion is coming through franchises and because the company
has recently hired other top executives.
Krispy Kreme expects sales to grocery stores, convenience stores and other
settings away from its stores to account for most of its growth. Peter Oakes,
a Merrill Lynch analyst, is apprehensive about those plans because, he says,
displays and presentation at other stores are often unattractive. He expects
sales growth to slow in the company's fourth quarter, which ends Jan. 28,
and in the first quarter this year. The company had no response.
But Mr. Schroeder is at least optimistic about the company's long- term
outlook. Pointing out that Krispy Kreme has only 164 stores and that a rival,
Dunkin' Donuts, has thousands, he said, "the prospects for the business are
good; the stock right now is a different story."
Copyright 2001 The New York Times Company |
