While the topic of education tends to focus on the skyrocketing cost of higher education that leaves graduates saddled with stifling debt, parents of young children have arguably an even more daunting task: providing their progeny a framework for success in the most critical years of human development.
According to Australia’s Lifelong Learning Centres, as children grow and develop, they become curious of their surroundings, thus catapulting an intuitive desire to learn and explore. Indeed, fostering this yearning is so vital that the United Nations Children's Fund (UNICEF) stresses the importance of kindergarten education for every child, no matter where he or she grows up.
Further, various research confirms the importance of early learning as a general principle. According to findings published by the Brookings Institution, children who attend preschool programs are better prepared for kindergarten than kids who have not enjoyed that curriculum. Logically, then, parents have every incentive to enroll their children in early education, especially as globalization will likely make the future job market much more competitive.
Such underlying realities bode well for the initial public offering (IPO) of KinderCare Learning Companies, which enters the market at a time when communities are finally returning to normal.
- When Is the KinderCare Learning IPO Date?
- KinderCare Learning Financial History
- KinderCare Learning Potential
- How to Buy KinderCare Learning IPO (KLC) Stock
- KLC Restrictions for Retail Investors
- KLC Pre-IPO
- Early Learning Opportunity
When Is the KinderCare Learning IPO Date?
Although early education isn’t exactly the most enticing topic for an IPO, KinderCare Learning bucks prior trends, presenting one of the biggest offerings in recent weeks. Therefore, even if the company is competing with several attractive public market debuts, the early learning specialist should be able to hold its own.
On Oct. 18 of this year, KinderCare filed its intention to enter the public arena with the U.S. Securities and Exchange Commission (SEC), disclosing an initial plan to raise $100 million. A few weeks later on Nov. 8, management set the terms for the deal, which involves the distribution of 25.8 million shares at a price range between $18 and $21. At the midpoint of this estimate, the education center would raise $503 million, affording a valuation of $2.7 billion.
KinderCare, which will trade under the ticker symbol KLC on the New York Stock Exchange, will make its debut on the IPO calendar on Nov. 18. Institutional heavyweights Barclays (NYSE: BCS), Morgan Stanley (NYSE: MS), Jefferies Financial Group Inc. (NYSE: JEF), Bank of America Corp. (NYSE: BAC), Goldman Sachs (NYSE: GS), Baird, Citigroup Inc. (NYSE: C), Credit Suisse (NYSE: CS), and Macquarie Group (PINK: MQBKY) represent the joint bookrunners for the deal.
Founded in 1969, KinderCare is an icon in the early education industry. It’s the largest provider of early childhood learning and care services in the U.S., thus attracting serious financial players to its public market debut.
Further, the timing for KLC stock presents an intriguing proposition. First, the number of fresh listings is presently on a record trajectory, facilitating ample opportunities for retail investors to get involved in ground-floor investments. While this dynamic could open the door to competition, KinderCare distinguishes itself by providing a different look from the technology and software names that dominate IPO-related news.
Second, more people are acclimatizing to the new normal, presenting a generally positive framework for KLC stock. Not surprisingly, adults are tired of quarantines, relishing any chance they can get to leave the house and interact with others. In turn, it’s not a stretch to assume that parents want the same social experiences for their children, especially at such a pivotal stage in their lives.
KinderCare Learning Financial History
According to data from Facts and Factors, the early childhood education market in 2019 was approximately $245 billion. However, experts project that by 2026, this sector could reach a valuation of $480 billion, translating to a compound annual growth rate (CAGR) of 10.5%.
Stateside, the numbers come down a bit, with IBISWorld noting that the early childhood learning centers feature a market size of around $10 billion. Additionally, the data cites 17,809 businesses operating in the sector, employing nearly 211,000 people.
On the surface, these stats might not stand out as particularly encouraging for KLC stock, considering that its upcoming IPO could see the underlying company command a market value of nearly $3 billion. Seemingly, that wouldn’t provide much room for growth, suggesting an overvalued investment against established fundamentals.
While no prospective KLC buyer should ignore the above risk, it’s also important to have a geopolitical perspective. A few years before the pandemic, The Washington Post noted that U.S. students were falling behind their international counterparts on standardized tests. Fast forward to December 2020 and another Post article revealed that the COVID-19 pandemic might impose a “lost generation” for affected students.
In the meantime, other nations — particularly China — have invested billions in their academic infrastructures. As well, science and technology have become battlegrounds for future economic viability. Therefore, it’s well within possibility that the current and future presidential administrations will buttress early learning initiatives, especially since education is becoming a matter of national security, per the Council on Foreign Relations.
In terms of KinderCare’s financials, investors must have faith in the broader economic recovery narrative. On an encouraging note, in 2019, the company generated revenue of $1.9 billion, up 12% from the prior year’s result. Under normal circumstances, such growth demonstrates KinderCare’s upside trajectory.
On the other hand, the early learning center posted revenue of a little under $1.4 billion for the year ending Jan. 2, 2021. That’s a sizable drop of 27%. Again, this metric stems from the COVID-19 impact, but unless the economy substantively recovers, KinderCare is liable to post disappointing numbers in the future.
Also noteworthy is that in the 3 years between 2018 through 2020, KinderCare only produced net losses. In addition, last year’s loss of $129.5 million is incredibly steep, implying that management has its work cut out for it.
KinderCare Learning Potential
Naturally, the importance of early education will have many investors eyeballing KLC stock. Moreover, some of the Cold War-like tensions no longer stem from the exclusive domain of military weaponry but rather in classrooms, textbooks and computers. Thus, KinderCare benefits from a mix of direct and cynical tailwinds.
At the same time, the IPO market is a tricky one, with the motives of early investors and public investors not always aligned. Plus, the losses in the income statement present distractions for KinderCare’s bullish narrative. Below are 3 pros and 3 cons to consider.
Pros of KLC stock
- Back to work: With more companies likely to recall their employees, childcare services may boom, which favors KinderCare’s bottom line.
- Pandemic savings: According to a Bloomberg report, Americans have stashed away $2.7 trillion in crisis savings.
- Socialization urges: Parents wanting the best for their children will probably push them to early learning centers to establish valuable social skills and experiences.
Cons of KLC stock
- Lower addressable market: Earlier in the crisis, many experts thought the lockdowns would spark a baby boom. Instead, the opposite has occurred.
- Economic concerns still drag: Because of multiple factors such as rising energy prices, the frail economic recovery could hit a snag.
- COVID-19 isn’t over yet: Unfortunately, society may be celebrating too soon as reports indicate new infections are rising again.
How to Buy KinderCare Learning IPO (KLC) Stock
With KLC stock set to make its debut shortly, retail investors must acquire shares at the open, an easy process if you know how to buy stocks. If not, just follow the steps below.
Step 1: Pick a brokerage.
Modern brokerages offer similar financial incentives such as commission-free trading. Therefore, you can narrow your list of best brokers to platforms that suit your investing style.
Step 2: Decide how many shares you want.
IPOs are always risky since they involve the unknown. Therefore, mitigate potential downside moves by choosing a balanced share count.
Step 3: Choose your order type.
Before trading, understand these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
KLC Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating. Avoid investing in stocks where you have privileged information.
Companies like ClickIPO allow retail investors to acquire pre-IPO shares (or new issues at their initial offering price) of select enterprises. Those interested in building their investing acumen should consider opening an account.
Early Learning Opportunity
Thanks to a rich combination of societal normalization and the increasing global competitiveness of education, KLC stock enjoys a favorable backdrop. Still, the narrative isn’t without risks since the underlying company and the economy feature fiscal concerns.