Vita Coco (COCO) Releases IPO Terms, Stock Looks Promising

Vita Coco (COCO) has disclosed the terms for its IPO. The company plans to raise about $224 million in the offering. What's COCO's forecast, and should you buy the stock?

Founded in 2004, Vita Coco manufactures coconut-based drinks and other ready-to-drink beverages to consumers worldwide.

Vita Coco's IPO date isn't final yet, but it's expected to be Oct. 21. The company plans to offer 11.5 million shares (78 percent secondary) at $18–$21 each. In a concurrent private placement, Keurig Dr Pepper has agreed to buy $20 million in shares from existing stockholder Verlinvest. The net proceeds from the IPO will be used for repaying debt, working capital requirements, and general corporate purposes.

The underwriters for the offering include Goldman Sachs, BofA Securities, Credit Suisse, and Evercore ISI, among others. The underwriters have the option to buy an additional 1.7 million shares at the IPO price from the selling stockholders. Vita Coco stock will trade under the ticker symbol “COCO” on the Nasdaq.

Unlike many other companies planning IPOs, Vita Coco is profitable. The company reported a net income of $32.7 million in 2020, compared with a net income of $9.4 million in 2019. Vita Coco’s revenue rose 9.4 percent YoY (year-over-year) to $310.6 million in 2020, and 15.2 percent YoY to $177.3 million in the first six months of 2021.

The global coconut water market, valued at an estimated $4.3 billion in 2019, is set to reach $16.4 billion in value by 2027, according to Grand View Research. The major drivers of this anticipated rise include an increase in the number of customers seeking nutritional and functional drinks to maintain a better lifestyle, as well as a decrease in the consumption of carbonated and sugary beverages.

Vita Coco is seeking a valuation of about $1.1 billion in its IPO. Based on its pro forma market cap, Vita Coco’s 2020 price-to-sales multiple is 3.5x. Considering that peers Monster Beverage and Coca-Cola have next-12-month EV-to-sales multiples of 7.6x and 6.8x, respectively, Vita Coco stock looks like a good deal.

Vita Coco’s coconut water market share in the U.S. is around 46 percent, a 36 percent market share advantage over the closest leading competitor. The company's portfolio also includes Runa, an energy drink made from plants, PWR LIFT, a flavored protein-infused water, and Ever & Ever, a sustainably packaged water. Vita Coco’s products are offered in 24 countries across three continents through several channels.

According to McKinsey, the global wellness market, which includes fitness, health, sleep, nutrition, appearance, and mindfulness, is currently worth over $1.5 trillion and is expected to grow by 5 percent to 10 percent each year. Overall, Vita Coco has solid industry growth dynamics in its favor.

You can buy COCO stock through a traditional brokerage or an online discount broker such as Robinhood.