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Bob Moon: Its ads may claim otherwise, but Toys “R” Us is growing up. The big-box toy seller revealed today it plans to become publicly-traded. The Initial Public Offering could raise up to $800 million. Of course, we’ve been here before: Private investors bought out shareholders five years ago, when Wal-Mart and Target started whipping Toys “R” Us on the playground. Now, they’re aiming to get their money back.
Marketplace’s Jeff Horwich reports it’s a tricky time to be trying that.
Jeff Horwich: If you’re looking for a cool stock symbol for your portfolio, Toys “R” Us has a great one: T-O-Y-S. But if you’re in it for the money, consider some other IPOs this spring. The clothing chain Express began selling its shares on the market weeks ago — it’s down 15 percent. Metals USA — down 27 percent from April.
PAUL BARD: We still think we’re in the early stages of a recovery in the IPO space.
Paul Bard with Renaissance Capital says companies like Toys “R” Us, Neiman Marcus and Dunkin’ Donuts are in a tough spot. Their private owners have turned things around. But the volatile stock market makes it a risky time to complete the cycle — go public again.
BARD: These companies have now been cleaned up, their numbers are starting to look better with the recovery that’s taking hold, and they need to recapitalize the business. The really need to offer investors a good incentive to buy in and that means a very attractive price.
Bard thinks Toys “R” Us could reverse the trend of dismal IPOs. The toy store’s profits are up 55 percent. The new owners brought in a Target executive as CEO. He closed more than 100 stores, opened almost as many new ones, and built up the company’s online business.
Toy industry consultant Richard Gottlieb says Toys “R” Us has made smart bets on hot toys, like stocking up on those Zhu Zhu Pets hamster things. And it’s got more variety.
RICHARD GOTTLIEB: When you go into a toy department at Wal-Mart, you’re not going to be surprised — you’re going to find exactly what you saw advertised on television. But when you go into a Toys “R” Us, you’re going to see some things maybe you never thought you’d see.
But shopping for toys is one thing — with an Initial Public Offering, investors like to know what they’re going to get.
I’m Jeff Horwich for Marketplace.
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