December 16 falls 25 days after the November 21 IPO of Vince Holding Corp (VNCE), and marks the end of the quiet period on underwriter research reports on the high end clothing firm. The IPO underwriters will be permitted to release positive information on the firm beginning the sixteenth, likely leading to at least a brief boost in the price of VNCE shares.
The VNCE IPO beat its expected price range of $17-$19 per share with a pricing of $20 per share, and posted an impressive first day return of 43.3%. The stock has since seen moderate growth, rising as high as $32.19 per share. VNCE closed at $31.84 per share on December 13. See our prior article
The many underwriters, including Goldman Sachs, Robert W Baird, Barclays Capital, BofA Merrill Lynch, J.P. Morgan, KeyBanc Capital Markets, Stifel Nicolas & Company, Wells Fargo Securities, and William Blair, will seek to ride the early success of the stock with the release of positive detailed research reports at the conclusion of the quiet period.
Recent academic studies, along with our own research over the past two years, have generated empirical evidence of a correlation between the visibility and quantity of IPO underwriters and a rise in stock prices at the expiration of the quiet period.
The price typically begins to gain ground a few days in advance of the actual expiration, as investors begin to purchase shares in an effort to take advantage of the upcoming release of underwriter reports. These investors understand that there is little chance that the underwriters will release anything but positive information on a firm that they recently underwrote. These buys lead to an increased price ahead of the quiet period expiration.
The Vince IPO allowed the clothing line to remove itself from Apparel Holding Corp and become an entirely separate entity-and a much more attractive one from an investment perspective. The Vince clothing brand debuted with a collection of knits and cashmere sweaters for women in 2002, and has since expanded with a collection for men, women's shoes, and expanded offerings in leather and denim outerwear.
The majority of the firm's sales are through wholesale-approximately 70%-but VNCE is making efforts to move into the retail world, having opened its first retail location in 2008 and expanding to a total of 21 retail locations and six outlet stores.
Vince must compete with similar clothing retailers, including VF Corporation (VFC), G-III Apparel Group, Ltd (GIII), Jones Group (JNY), PVH Corp (PVH), Fifth and Pacific (FNP), and Perry Ellis (PERY).
CEO Jill Granoff has served as CEO of Vince August 2012 (before it became independent of Apparel Holding Corp). She previously served as President and CEO of Victoria Secret Beauty and CEO of Kenneth Cole Productions. Ms. Granoff also serves on the boards of the Fashion Institute of Technology Foundation and Demandware.
We're optimistic on the future of this stock and the expiration of the quiet period should continue to help move the stock higher.
Given Vince's name recognition potential and consistent profits over the past several years, its strong market debut was no surprise. We're happy to have the opportunity to buy Vince without having to buy into the much less appealing Apparel Holding Corp. There is some risk in purchasing a firm with a single stylistic approach-the winds of fashion are neither consistent nor predictable-but the line has done well since its 2002 beginnings, providing at least some confidence in its ability to stay ahead of trends.