IPO Notes: KinderCare Learning Centers (KLC)
Why I'm not convinced that this company is worth going along for the ride
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Summary
Kindercare Learning Centers (KLC) is the largest provider of early childhood education (ECE) with over 1,500 centers across 40 states.
The company was looking to offer 24 million shares between $23 - $27/share and ended up pricing at $24, opened at $27, and is marginally up since then (~$28).
The point of the IPO was largely to raise capital and pay down the ~$1.6 billion in variable-rate debt.
KLC was devastated by COVID but has improved significantly since with acquisitions (Creme School), cutting underperforming locations, increased occupancy, and overall financial improvement.
We believe that while the company has done well ahead of an IPO, the “strong” points highlighted by the company in the S-1 are more about “fluff” and “marketing” rather than a solid growth strategy that would get an investor excited.
It was noted that it pulled its IPO in 2021 due to “regulatory delays” despite questionable reporting controls, and auditors were even concerned and confused.
With that, let me go over what I believe is important from the S-1 and then the issues that I have that convinced me to not go long this company post-IPO.
What the S-1 Tells Us
The first rule about researching an IPO via the S-1 is deciphering what is real, and what’s bullshit and I think we have some bullshit in here.