Magnum Ice Cream Stock Faces Rocky Road Post-IPO
Investors hoping for a sweet treat were left with mild disappointment this week as the debut of the newly independent Magnum Ice Cream Co. (NYSE:MICC) was less than impressive.
- MICC stock is moving. See the real-time price action here.
Magnum is the world's largest ice cream maker and home to heavy hitters like Ben & Jerry's and Cornetto. The stock began trading on Monday and has been under pressure following its spinoff from consumer giant Unilever PLC (NYSE:UL).
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The stock opened slightly below expectations at $14.88 (analysts were looking for a valuation closer to $20/share), but the price has held steady so far. The “reference price” set in Europe before trading began was €12.80 ($13.50).
Selling Pressure
Many index funds and institutional investors that hold Unilever were automatically given shares of Magnum Ice Cream.
However, some of these funds are required to sell the new shares immediately because the spin-out does not fit their specific investment criteria due to factors like market cap or sector mandates. The institutional-level selling created pressure on the stock.
Magnum Ice Cream announced it will likely not pay dividends until 2027 as it focuses on setting up its independent operations. The news left those hungry for yield with a rather vanilla outlook for the near term and chilled the sentiment of income-focused investors who loved Unilever for its reliable payouts.
Analyst View
Bull Case: Despite the rocky start, some analysts have already initiated Buy ratings on Magnum Ice Cream stock. They argue that once the initial “forced selling” ends, the company is a cash-flow machine with a dominant global market share.
Bear Case: Skeptics are worried about the lack of immediate dividends and the general health of the ice cream market with headwinds like consumers’ health consciousness, GLP-1s and rising sugar costs.
The Takeaway
The market is still taste-testing Magnum's standalone ice cream-focused business. Until the selling pressure melts away, Magnum shares might continue to offer a rocky road, but patient investors could eventually lick the competition.
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