REUTERS — Smithfield Foods was valued at US$7.7 billion after its shares fell last week in a muted debut that might prompt other initial public offering candidates to tread cautiously.
The lukewarm reception to the largest U.S. pork processor’s public offering underscores investors’ cautious approach to new listings.
Despite the surge of optimism sparked by President Donald Trump’s pledges for pro-business policies and corporate tax reductions, concerns about unpredictable interest rates and inflation have tempered overall economic confidence.
Read Also
Key actions identified to address canola tariffs
Federal and Saskatchewan governments discuss next steps with industry on Chinese tariffs
Even tried-and-tested companies such as Smithfield, which is profitable, may have to temper their valuation expectations, analysts have said.
“For companies planning IPOs this year, this may be a wake-up call to align their expectations with the new, more selective investment climate,” said Aakarsh Rattan Ramchandani, chief analyst and strategy officer at financial insights platform Bigdata.com.
Smithfield, with a workforce of 34,000 in the United States and 2,500 in Mexico, had warned of tariff risks and immigration-related workforce disruptions in its IPO prospectus.
These concerns have become more pressing with Trump’s recent threats of universal tariffs and the beginning of a sweeping immigration crackdown when he took office last month.
Export sales accounted for 13 per cent of Smithfield’s total sales for the nine months ended Sept. 29.
“Investors in their IPO will likely need to price in additional risks related to trade tensions, potential tariffs and immigration risks,” Ramchandani said.
Smithfield had initially targeted proceeds of up to $940 million but downsized the IPO and settled for $521.7 million, to be divided between it and parent company WH Group, which was also selling some shares.
“We have an extremely strong balance sheet. We wanted our share price to be in a position to trade really well over the course of the coming future,” said chief executive officer Shane Smith.
