Johnson & Johnson consumer arm’s shares jump in biggest US IPO since 2021

Shares of Kenvue, the consumer arm of healthcare giant Johnson & Johnson, jumped on their first day of trading after an upsized initial public offering that marked the biggest US listing in almost 18 months.

The carved-out company sold $3.8bn of stock at a price of $22 per share, giving it an initial equity valuation of $41bn. The stock rose 22.3 per cent to $26.90 on the New York Stock Exchange on Thursday.

The deal is the largest since the IPO of electric vehicle maker Rivian in November 2021, and alone will more than double the sum raised in traditional US listings this year.

Kenvue produces over-the-counter medicines and brands such as Tylenol painkillers, Listerine mouthwash and Aveeno skin care products. It reported revenue of $15bn and pro forma net income of $1.5bn in 2022.

It also produces J&J’s baby powder products, which have been at the centre of years of legal battles over whether they caused cancer, and the new company has already been targeted in lawsuits. J&J could not be immediately reached for comment on the Kenvue offering.

J&J, which will continue to own more than 90 per cent of Kenvue’s shares, has agreed to shield it from any legal costs related to sales of baby powder in the US and Canada. However, Kenvue cautioned in its prospectus that it “cannot assure” investors that the indemnity from its parent would be sufficient, and it is also facing claims related to sales in other countries.

The US IPO market has been mired in one of its longest slowdowns in decades since early 2022 thanks to a combination of rising interest rates, volatile stock markets and pessimistic economic forecasts. Before Wednesday’s deal, just $2.4bn had been raised through traditional IPOs this year, according to Dealogic data.

Kenvue is unusual among IPO candidates in that it is profitable, backed by a large parent group, and plans to pay a $1.5bn annual dividend. As such, most bankers do not expect it to trigger an immediate surge in further listings, but the deal is nonetheless being closely watched across Wall Street as a test of investor confidence.

“It’s pretty idiosyncratic, but . . . I think it’s a good sign,” said a senior executive at a bank that did not work on the deal.

Goldman Sachs, JPMorgan Chase and Bank of America were lead underwriters on the listing.

Inflammatory disease specialist Acelyrin is set to provide a further test for the beleaguered listings market in the coming days with the largest biotech IPO since June 2021. It is looking to raise up to $477mn at a valuation of up to $1.6bn.

The biotech sector has been particularly hard hit by the IPO freeze, as early-stage companies rely on equity sales to fund long and expensive drug developments.