Fresh Market Becomes Top 2010 IPO Challenger (TFM, KR, WFMI)

The Fresh Market Inc. (NASDAQ: TFM) just became a challenger to this week’s review of the top 7 IPO’s of 2010.  The company priced its initial public offering of 13,175,000 shares of common stock being sold by stockholders at $22.00 per share.   The company is a higher-end grocery chain with fresh (you’d hope, hence the name) and premium products and it has its Old World Butcher shop, European Delicatesan and Fresh Baked Goods.  The company notes, “Our goal is to become an out of the ordinary food destination store for those who enjoy cooking and good eating.”  From an outsider’s perspective, it looks nearly like a regional cross somewhere between The Kroger Co. (NYSE: KR) and Whole Foods Market, Inc. (NASDAQ: WFMI) on a much smaller niche scale.

BofA Merrill Lynch, J.P. Morgan, and Goldman Sachs were listed as the joint book-running managers; and the underwriters have a 30-day option to purchase up to an additional 1,976,250 shares of common stock from the selling stockholders at the public offering price.

What is interesting is that this premium pricing was above the $18.00 to $20.00 range despite the sale being from holders.  There is still room for growth here as it has a small geographic footprint so far where it has 3 or more stores: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia.  Yep, no Texas, no Colorado, no California.

The growth has been impressive, but its valuations are through the roof in this premium IPO.  IPODesktop.com noted, “At the middle of the forecast range, Fresh Market would be valued at 16.4 times net assets, according to IPODesktop.com in Marina del Rey, California… That’s almost six times higher than the ratio of 2.9 for Austin, Texas-based Whole Foods Market Inc….”

At 11:00 AM EST we have shares up 49% at $32.81 on about 7.8 million shares, and the intraday high was listed as $35.00.  This was a hot IPO and it has no China or India theme as we have seen with so many other hot IPOs of 2010.  It is a grocery store destination to boot.

UPDATE FOR CLOSE: The Fresh Market shares closed up 45.95% at $32.11 on more than 13 million shares.

JON C. OGG