Is Bausch + Lomb Corp. IPO a Good Buy?

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Contributor, Benzinga
May 9, 2022
$16.02
-0.48[-2.91%]
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Eyecare specialist Bausch + Lomb Corp. is on the docket as new public listings gradually pick back up, drawing both participants and interested market observers.

The size of the upcoming deal will make it the second biggest of the year so far, adding enthusiasm to an already relevant business.

Although exciting, this offering is entering the capital market at a particularly volatile juncture, creating a nail-biting scenario as it could go either way.

Lacking a proven track record, all public market debuts carry at least some risk for failure. However, the upcoming launch of popular eyecare specialist Bausch + Lomb Corp. will face extraordinary pressure as it may serve as the benchmark for future viability of newly listed companies. After rip-roaring cycles in 2020 and 2021, the current year was almost doomed for underperformance. Unfortunately, shocking global disruptions all but ended motivation for business enterprises to seek public capital.

Today, companies are picking up the pieces, with a few brave souls dipping their toes into the water. This circumstance sets up both the enticing opportunity for Bausch + Lomb as well as its stomach-churning risk. Get it right and the company could soak up investor dollars from a deflated competitive field, in turn inspiring other firms to take the leap of faith. But get it wrong and sentiment for new listings could shrivel.

For Bausch + Lomb, the overwhelming catalyst is cynicism. According to the International Myopia Institute, nearsightedness is “growing around the world, with a recent study estimating that on average, 30% of the world is currently myopic and by 2050, almost 50% will be myopic.” In nominal terms, that translates to a staggering 5 billion people. Since no cure for the condition exists, the best approach — outside of surgical procedures — is mitigation.

On the other hand, Bausch + Lomb is making its public market debut during an exceptionally volatile phase. With soaring inflation crimping consumer purchasing power — made all the worse by escalating geopolitical tensions — the eyecare specialist couldn’t have picked a more eventful juncture to start its publicly traded journey.

Below are the key factors to consider before participating in this offering.

What Does Bausch + Lomb Do?

An eyecare specialist, Bausch + Lomb is arguably best known for its soft contact lens multi-purpose solutions. Based on data compiled by the Centers for Disease Control and Prevention, an “estimated 45 million people in the U.S. wear contact lenses.” Given its significant brand presence and footprint, this statistic alone is a compelling backdrop for the company.

Even better, Bausch + Lomb is an international powerhouse, featuring distribution in approximately 100 countries and commanding a comprehensive portfolio of over 400 products. Adding to the bullish narrative, the eyecare firm enjoys a global brand awareness of more than 70%.

Some of the core advantages of Bausch + Lomb include the following:

  • Holistic product portfolio: While Bausch + Lomb caters heavily toward contact lens solutions under its global vision care segment, the company actually levers a massive footprint throughout the eyecare spectrum thanks to its ophthalmic pharmaceuticals and surgical markets.
  • Resilience to generic competitors: Naturally, every healthcare-related company will suffer at least some competitive pressures from producers of generic products, and Bausch + Lomb is no exception. However, given that vision is the most precious and economically significant sense, consumers are less likely to go cheap with their optical health.
  • Ideal positioning for emerging opportunities: According to Bausch + Lomb’s Form S-1 disclosure form filed with the U.S. Securities and Exchange Commission (SEC), the company is making inroads with the growing middle class in key emerging markets.

Presently, Bausch + Lomb generates about 62% of its total revenue from the vision care and consumer healthcare segment. Over time, it’s possible that rising incidences of medical conditions that impact eye health — such as diabetes — could more evenly balance the company’s sales mix. Therefore, the eyecare specialist is a name to watch even if you’re uninterested in its new listing.

When is the Bausch + Lomb IPO Date?

As the second-biggest initial public offering (IPO) of the year so far, Bausch + Lomb is under significant scrutiny. It’s not an exaggeration to say that its IPO — or the first time a privately held company distributes its shares to retail investors — could be the make-or-break moment for other private enterprises’ ambitions to expand their business through public capital funding.

Barring any unusual circumstances, Bausch + Lomb will enter the IPO calendar on May 6, 2022. Shares will trade on the New York Stock Exchange under the ticker symbol BLCO. Underwriting the offering are multiple heavy hitters, including Morgan Stanley (NYSE: MS), Goldman Sachs Groups Inc. (NYSE: GS), Citigroup Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM) among others.

Interestingly, Bausch + Lomb will also simultaneously list on the Toronto Stock Exchange. Moreover, BLCO stock actually represents a spinoff from pharmaceutical firm Bausch Health. Under the terms of its IPO, Bausch + Lomb will distribute 35 million shares at a price range between $21 and $24. At the midpoint, the company will raise about $788 million, granting the firm an $8.2 billion market capitalization. This IPO will consist entirely of secondary shares.

Based on outside fundamentals, the eyecare firm may have a higher success probability than recent new listings. Primarily, the global “economic burden of uncorrected distance refractive error, largely caused by myopia, is estimated to be U.S. $202 billion annually.” Therefore, as a means for both social functionality and economic productivity, eyecare is essential.

Still, Bausch + Lomb isn’t immune from all fundamental headwinds. Should rising inflation impinge upon household budgets, affected individuals may opt for prescription glasses, which all other things being equal require fewer financial transactions.

What Analysts are Saying About Bausch + Lomb IPO

According to information provided by The Wall Street Journal at the time of this writing, no analyst has yet to weigh in with a detailed assessment, rating and price target. However, plenty of buzz from retail investors surrounds BLCO stock as it could end up becoming a bellwether for IPO sentiment.

As mentioned earlier, Bausch + Lomb will be the second-biggest new listing of the year so far, shouldering an unofficial burden for the rest of the market. Per data from Dealogic, more than 1,000 companies went public in 2021, raising approximately $316 billion from the proceedings. However, the current market environment has been anathema to speculation, resulting in a dearth of fresh offerings.

Indeed, one source indicates that 26 IPOs have priced this year, down a staggering 80% from this point in 2021. Though Bausch + Lomb’s sizable deal may be encouraging on one hand, in reality, it’s a double-edged sword. Falling to make good on the anticipation may shut down major IPOs for months, especially since Bausch + Lomb serves compelling and relevant medical needs.

Another factor to consider is that the company isn’t the only eyecare specialist in town. Given the inflationary economic environment, this segment could suffer from commoditization as companies attempt to race to the bottom. As well, if circumstances erode badly enough, the threat from generic competition cannot be ignored.

Bausch + Lomb Financial History

Unlike many of the flawed IPOs that the investment community has seen recently, Bausch + Lomb is appealing not only for its expanding addressable market but also for its respectably robust financials. For example, in the nine months ended Sept. 30, 2021, the company generated $2.76 billion in revenue, up 12% from the year-ago period.

However, despite supply chain disruptions and increased costs associated with “new normal” dynamics, Bausch + Lomb managed to post positive net income for the first three quarters of 2020 and 2021. Beyond its highly profitable business, the eyecare specialist also features strong cash flow. Therefore, BLCO stock has substance backing up its IPO, not just aspirational figures that may (or may not) materialize.

Bausch + Lomb Potential

Although new listings are fraught with risk, Bausch + Lomb has certainly dialed up the viability factor. Primarily, the addressable market for myopia-related products and services is massive and accelerating. Further, some countries face more severe myopia trends than others, enabling cynical upside.

Additionally, Bausch + Lomb is relatively insulated from shocks to the system. For those that need the company’s products, impacted consumers will likely find ways to purchase them — unless circumstances have gone extremely awry.

That said, Bausch + Lomb isn’t really tied to a unique product offering. Therefore, it must continue to distinguish itself against the competition, a difficult endeavor because of the commoditized nature of over-the-counter healthcare solutions.

Where to Buy Bausch + Lomb IPO Stock

If you want to participate in Bausch + Lomb’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

BLCO Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

BLCO Pre-IPO

Although information on possibly acquiring BLCO on a pre-IPO basis is limited, those interested in early bird opportunities may want to consider opening an account with EquityZen.

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About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.