The largest pure-play consumer health company
Johnson and Johnson is the largest healthcare company in the United States by market cap. We all grew up on J&J - whether it be the first Bandaid when you scraped your knee or the distinct scent of Johnson’s baby products. A year ago J&J announced the split of their consumer health division and last week the stock started trading on the NYSE under the name Kenvue (KVUE).
Many of the brands that Kenvue carries has become synonymous with the product. I’m not sure what else to call it other than Band-aid!
This is going to be one of the biggest IPOs for the year and in fact, since 2021. But, that talcum powder that we all knew and loved - has now become a liability for the company, as there are numerous claims against the company that the product causes cancer from the presence of asbestos. And now the question is what happens with the numerous lawsuits surrounding the claims that the Johnson’s Baby Powder may cause cancer.
Well, J&J is retaining all the liabilities from the lawsuits in the US and Canada and will shield Kenvue from any payouts. They’ve also vowed to discontinue the product from 2023. But, there still remains a significant risk of liabilities arising from outside these countries.
Kenvue, with its portfolio of powerful brands, promises to be an exciting IPO being launched in this difficult environment, with almost $2B in expected cash flows and an expected dividend of 3.7%. The company posted $14.95B in net sales in Y2022.
Kenvue priced their IPO at $22 and increased the share offering from 151.2million shares to 172.8million shares, as free float.
The stock opened 16% above its IPO price trading at 15.7milllion shares as its first trade at $25.53. At the opening price, the company was valued at $47.67 billion. J&J continues to own 1.72billlion share or 91.9% of the shares.
The company has strong prospects and is a major player in the consumer health industry. The fundamentals for Kenvue still require some work. Margins are weak compared to other industry players and the shares expensive even at the launch price. J&J is expecting that the company will command a premium because of the strength of their portfolio and their dividend.
This could be potential long-term holding but it is not without risks.
Please bear in mind that newly listed companies are always risky, even spin-off’s such as Kenvue who have had a strong parent.
This is not investment advice. This is not an exhaustive deep dive of the company. Please read the investor materials and the IPO prospectus (S-1) and do your own due diligence before investing.
Disclosure: I am long and did manage to get a starter allocation at $25.55.
Read on below for my brief assessment of Kenvue - the company, the market, the financial analysis, valuation and the risks. This section is for premium subscribers. Please consider subscribing for $10/month or $100/year. Thank you!