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Cruise operator Viking Holdings rose in its market debut, consolidating billions of dollars in profits for two of the world’s biggest investors and boosting private equity firms’ hopes of exiting other long-held investments.
Shares of Bermuda-based Viking, which targets people 55 and over who speak English and excludes passengers under 18, topped $26 in early trading on Wednesday, after falling in an initial public offering on Tuesday Worth $1.5 billion had a price of $24. The share price gave the company a market capitalization of $11.5 billion.
Strong demand from investors led Viking to increase the size of the deal twice before it priced the second-largest U.S. IPO this year, just behind Arc’s $1.6 billion IPO. teryx owner Amer Sports in February.
The expanded deal is likely to give hope to other private equity groups looking to exit long-held investments but worried about the slow reopening of the IPO market after a two-year drought.
In March, the IPO of private equity-backed beauty retailer Douglas in Germany was hailed as a “breath of relief” by bankers, but shares are trading about 15 percent below the offering price. In New York, KKR-backed Brightspring Health is 18 percent below its January IPO price.
However, last week shares of private equity firm CVC traded higher in their debut in Amsterdam after expanding the size of its €2 billion IPO.
Private equity firms worldwide are sitting on about 28,000 unsold companies worth about $3 trillion, according to a report from consulting group Bain.
U.S. private equity group TPG and Canada’s largest pension fund CPP Investments accounted for most of the shares sold in Viking’s float.
According to calculations by the Financial Times, the deal will bring profits to both groups of over $1.5 billion each. Both first invested in 2016 and added additional funds during the pandemic. In total, each invested about $680 million.
TPG and CPP declined to comment on their returns.
The additional equity capital injected during the pandemic helped Viking weather the severe downturn better financially than publicly traded competitors such as Carnival Cruise Lines and Royal Caribbean, both of which have taken on significant debt.
“Converting to a public company increases our financial flexibility and can help us take advantage of future opportunities,” said founder Torstein Hagen in a letter included in Viking’s prospectus.
The listing on the New York Stock Exchange gives Norwegian-born Hagen a stake worth more than $5 billion. A former cruise company executive and partner at McKinsey Group, Hagen founded Viking Cruises in 1997 with four ships that operate primarily on European river routes.
The 92-strong fleet now undertakes river and sea trips around the world. In 2022, the Viking Expedition was launched, offering trips to the Earth’s poles.
Proceeds from the IPO include $264 million in funds for Viking to cover IPO tax obligations and provide working capital.
The deal comes as the cruise industry is becoming one of the fastest growing tourism sectors. According to the Cruise Lines International Association, 36 million passengers are expected to take a cruise this year, up 20 percent from 2019.
The cruise line’s IPO brings the value of U.S. IPOs so far this year to about $13.5 billion, far more than the amount raised at the same time in the previous two years.
Bankers have warned that the IPO market remains delicate and its recovery could easily be derailed by a few failed deals.
Later this week, Spanish cosmetics group Puig will go public in Madrid in a deal worth up to 3 billion euros, in what is expected to be the world’s largest IPO this year.