Stock in Dunkin’ Brands has soared 34% since an initial public offering in July at $19 a share, driven by investor optimism on the coffee and doughnut chain’s growth potential in markets beyond the East Coast. However, could a balance sheet weighted down with significant indebtedness prove an obstacle to an expansionary strategy dependent on new restaurant openings by franchisees?
On August 1, the company sold 22.5 million shares of common stock in an IPO, resulting in net proceeds to the company of approximately $390.0 million, after deducting underwriter discounts and commissions. Unfortunately, little of these monies are available for working capital purposes, as $375.0 million went to retiring outstanding debt.