After postponing its IPO twice last year when the value of the peso nosedived 15 percent to record lows in the aftermath of Donald Trump's election (undoubtedly in connection to Trump's opposition to the North American Free Trade Agreement and his incitive rhetoric regarding relations with Mexico), tequila brand Jose Cuervo is taking its shot at going public.
This isn't light news to swallow, considering this 200-something-year-old company doesn't just boast 11 generations of tradition — also owning 35 percent of the worldwide tequila market share and 33 percent in the United States' tequila sector in 2013, Jose Cuervo is expected to have a highly successful launch.
In the last few days of January, it was said that the brand was formally marketing deals across multiple cities and that investors can expect a price as early as Wednesday, Feb. 8. According to International Business Times, the company is aiming to raise over $700 million in an initial public offering and is opening up 476.6 million shares between 30 to 34 pesos each, or about $1.41 to $1.60.
Since 2002, sales of tequila in the U.S. have more than doubled in volume, skyrocketing from 7.2 million cases to 14.8 million in 2015, Quartz reported, citing the Distilled Spirits Council of the United States. And with North America making up about 60 percent of Jose Cuervo's sales volumes, it's not surprising that there are lot of eyes on this IPO and a lot of hope for it to go well.
Still, despite its success with tequila, Jose Cuervo has been working on diversifying its product lines, when just a few years ago it traded its control of tequila maker Don Julio for Bushmills Irish Whiskey.
"We were a company in which 80 percent of our sales were tequila. We wanted to get rid of that independence," Juan Domingo Beckmann, CEO of Casa Cuervo, said to Latin Trade Magazine. Jose Cuervo stated the proceeds would fund its growth, expand its portfolio, and go toward the development of its Mexican hometown, Tequila, which is fitting for this tequila brand.
Yet, the day after Jose Cuervo announced its upcoming IPO, Whitehouse spokesperson Sean Spicer said that a 20-percent border tax on Mexican goods would go toward building the border wall. Later on, he clarified that this was "not a policy proposal," but an example of ways the wall could be paid for. Will the actions of the Trump administration put more salt in Jose Cuervo's shot at an IPO? Or could the 15-percent drop in the peso be a long-term advantage for Cuervo by making its products more affordable in the U.S., as Bloomberg Intelligence analyst Julie Chariell suggested? And why did the brand mark February on the calendar after the November election?
Analyst Gerardo Copca of MetAnalisis, a Mexican-based financial advisory firm, said a factor of its timing was decided on the dialogue relationship between the two countries.
"The governments of Mexico and the United States are going to dedicate themselves to negotiation that creates confidence," he told International Business Times. "Mexico's stock market has shown that recently."
Tequila lovers will soon see how this tequila titan performs when it comes to stock, but no matter which way the dice rolls, it's time to stock up on the glasses and limes. Read More