IPO Market In Good Spirits As José Cuervo Prices Its IPO

Trump, Tequila And A Mexican Border Tax

José Cuervo, the distillery, blender and bottler of tequila, priced its IPO at the high end of the expected range of 34 pesos ($1.665) per share. The company is looking to raise around $700 million by selling an approximate stake of 13.3 percent, which values the centuries-old company at $5.6 billion.

As noted by Reuters, the company has been eyeing an IPO for some time and put its plan on hold twice last year due to uncertainties from the U.S. election and the declining value of the peso. José Cuervo controls an approximate 30 percent share of the global tequila market. According to Statista, sales volume (in 1,000 nine liter cases) of Jose Cuervo tequila in the United States rose to 3,180 in 2015 from 3,082 in 2014 and 3,030 in 2013. Fortune noted that U.S. consumers bought 7 percent more tequila in 2016 than they did in the prior year. Image Credit: Copper tequila stills at Jose Cuervo distillery, [GNU and CC 3.0], via Wikimedia Commons

Fortune also pointed out that sales in the United States and Canada combine for 64 percent of José Cuervo's total revenue.

Needless to say, Trump's proposed border tax calls into question the Mexican company's prospects in United States in 2017 and beyond. However, the declining value of the peso could prove to be a blessing in disguise for the company as it translates to a cheaper selling price in the U.S. market.

There is one more important fact to consider. Jose Cuervo operates in the higher-end of the tequila segment so brand loyal consumers are unlikely to shy away from the brand if forced to pay a few extra dollars per bottle as part of any future border tax.