July 28, 2011 in Business

Dunkin’ IPO perking along

Christina Rexrode Associated Press
Dunkin’ Donuts No. 7

Dunkin’ Donuts is the seventh-biggest restaurant chain by U.S. revenue, compared with rival Starbucks, which is No. 3. According to Technomic, Dunkin’ Donuts posted a bigger increase in U.S. revenue last year than even McDonald’s Corp. and opened more new locations in the U.S. than any restaurant except Subway.

NEW YORK – It’s time to make the money.

Shares of Dunkin’ Brands Group Inc. soared nearly 47 percent on Wednesday, their first day of trading, feeding the demand of investors looking to trade in coffee and doughnuts.

Dunkin’ Brands shares began trading on the Nasdaq under the symbol DNKN, opening Wednesday morning at almost $25. Shares closed at $27.85, up from the $19 initial public offering price. Dunkin’ Brands sold 22.3 million shares at the offering price, raising about $423 million.

Most stocks get a one-time pop on their first trading day. Still, Dunkin’ Brands’ reception indicates that investors are willing to shell out for certain initial public offerings – and not just for the tech companies like LinkedIn Corp. and Groupon Inc.

“There’s more to the IPO market than just the Internet bubble,” said John Fitzgibbon, founder of IPOscoop.com.

The public offering of Dunkin’ Brands, which owns Dunkin’ Donuts and the Baskin-Robbins ice cream chain, comes at a time when restaurants are struggling as the economy forces Americans to cut back on eating out. The company has said it will use the money it raised on the stock market to pay down debt, in part because it wants to expand, both overseas and in the U.S. outside of its stronghold in the Northeast.

Larry Miller, an analyst who follows Starbucks Corp. for RBC Capital Markets, compared Dunkin’ Donuts to Tim Hortons, the coffee and doughnut giant of Canada that he said had difficulties expanding into the U.S.

“Dunkin’ is a regional brand,” Miller said. “That will be a big test for Dunkin’, proving they work in different regions.”

But the brand’s name recognition could help. The company has carved an identity as a place where the working class can buy a cup o’ joe, seeking to distance itself from upper-crust Starbucks.

It’s too early to tell if people will invest in Dunkin’ Brands just because they like its coffee, but having name recognition in the Northeast, where Dunkin’ Donuts locations and investment bankers alike are concentrated, can’t hurt, said analyst Conrad Lyon.

© Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email