Hydrofarm stock (ticker: HYFM) opened at $46 and hit a high of $50. Shares recently changed hands at $48.58, up nearly 143%.
The soaring performance comes after Hydrofarm raised $173 million late Wednesday. The company sold 8,666,667 shares at $20 each, above its expected price range. The pricing came after Hydrofarm boosted its range Wednesday to $17 to $18, up from its prior expectations of $14 to $16.
J.P. Morgan and Stifel are lead underwriters on the deal.
Founded in 1977, Hydrofarm distributes and makes hydroponics equipment and supplies, including indoor grow lights, sediment filters, flood tables and benches, as well as pots for growing smaller plants. Its products are used to grow and cultivate cannabis, flowers, fruits, plants, and vegetables, a prospectus said. Hydroponics refers to the farming of plants without soil, but often using artificial lighting, in a controlled indoor or greenhouse environment.
Bill Toler, Hydrofarmâ€™s chairman and CEO, said he was â€œvery excited, very pleasedâ€ with the IPO. â€œItâ€™s a very satisfying position to be in for people who have been with the company for a few months and the people who have been with the company for 40 years. Thereâ€™s both. We couldnâ€™t be happier for all of them,â€ he told Barronâ€™s.
Hydrofarm went public on the same day as Airbnb (ABNB). The home-sharing platform soared as much as 143% in its market debut.
Hydrofarm is going public as the movement to legalize cannabis gains momentum in the U.S. In November, voters in New Jersey chose to legalize marijuana. Toler believes that New York and Pennsylvania will soon follow. He estimates that 70% of Hydrofarmâ€™s end users are in the cannabis market. However, he emphasized that Hydrofarm doesnâ€™t grow cannabis. â€œWe are the picks and shovels, the supplier, the guy that sells equipment that enables you to grow [cannabis]. We donâ€™t touch the plant,â€ Toler said.
Hydrofarm is the â€œsafest and smartest way to play cannabis and the controlled environment ag space,â€ he added.
The company swung to a profit this year. Hydrofarm reported $2.1 million in income for the nine months ended Sept. 30, compared with $22.4 million in losses for the same period in 2019. Sales rose 40% to $254.8 million for the nine months ended Sept. 30 from $181.3 million for the comparable period last year. It employs about 300 people.
Hydrofarm has been growing its top-line revenue by an average of 17% every year for the past 15 years, Toler said. Hydrofarm, which he called a â€œ40-year old start-up,â€ is a mix of legacy leadership combined with newer management â€œthat will bring us to the future,â€ he said. Peter Wardenburg, Hydrofarmâ€™s founder and former CEO, currently runs product development, while Terry Fitch, who joined in 2019 as president, spent more than 20 years at Coca-Cola (KO). Toler himself is the former CEO of Hostess Brands (TWNK).
â€œWe have the go-forward skills to lead the company and the legacy leadership to come together,â€ Toler said.
Hydrofarm plans to use proceeds from the IPO to pay down debt, which is about $75 million. The company will then be in a position to make acquisitions, he said. â€œWe think there is an opportunity to help this industry consolidate,â€ said Toler, who will be looking for roll-up opportunities. Hydrofarm will consider any â€œproducts, brands, servicesâ€ that will help the company be a more complete supplier and partner to its customers, he said. â€œBeing a public company puts us in a position to be a leader,â€ he said.
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