Anyone seeking evidence of irrational exuberance in U.S. markets need look no further than Bitcoin, Gamestop and the excitement surrounding special purpose acquisition companies. But spare a thought, too, for Jo-Ann Stores, the Hudson-based chain of fabric stores. It’s a prime example of another investment phenomenon meriting scrutiny: the repeat IPO.
It’s not uncommon for companies to go from public to private to public again. Ideally, executives or private-equity firms make good use of the time away from the pressure of stock markets and quarterly earnings reports, fixing problems so businesses can emerge leaner, stronger and more profitable. With demand for shares as high as it is, though, it’s worth asking whether the temptation to cash out is bringing companies back to market before they’re ready.
Founded by German immigrants in 1943, Jo-Ann first went public in 1969, as Fabri-Centers of America Inc. Before going private again in 2011, the company reported an annual $2.1 billion in sales from about 750 locations. In its recently filed IPO prospectus, the purveyor of “handmade happiness” reported $2.3 billion in sales from around 850 stores in 2019, the last full year before the pandemic. Not exactly a growth story.
That said, one thing has grown pretty dramatically during the company’s 10 years in private hands: debt. Jo-Ann owed $930 million as of October 2020, up from zero at the end of 2011. In a letter to shareholders, CEO Wade Miquelon noted that the number is actually down from $1.4 billion a year earlier. The company doesn’t specify what it plans to do with the proceeds of its share offering, citing only “general corporate purposes.” But perhaps the aim is at least partly to pay down more of that debt.