MICHAELS CRAFTS

Michaels has IPO's for less than the chain's owners paid for it 8 years ago. (Nikki Bush/Bloomberg)

Michaels' stock was treading water on its first day of trading after going public on the Nasdaq for a second time.

Shares in the arts and craft chain were up two cents at the close on Friday to $17.02 US, a day after the shares were priced at $17 each in a $472 million IPO. They traded as low as $16.65 in morning trading before recovering.

Michaels was a publicly traded company before, but a group of private equity groups fund took the chain private in 2006 for about $6 billion — a 30 per cent premium to what the shares were worth at the time.

The IPO figure values the current company at about $3.5 billion, a far cry from its previous value. But the company was taken private just before the crash, at a time when private equity was buying companies at huge premiums yet still confident they could be loaded up with debt, restructured and sold off again.

Operationally, Michaels still posts strong results, earning a profit of $242 million on $4.6 billion worth of total sales last fiscal year. And the company has 1,263 stores currently, with plans to open 40 to 45 more this year.

But the company is weighed down with a lot of debt — some $3.7 billion at last count — and the IPO proceeds are earmarked to paying that down.

The Irving, Texas-based company raised $472 million from the offering.

Busy IPO week

The Michaels IPO also comes on the tail end of a mini-rush to go public. It's the third-busiest week for IPOs since 2000, according to IPO investment adviser Renaissance Capital.

The last IPO from a major retailer was The Container Store Group Inc., which made its debut late last year. Its shares have since fallen 20 per cent to close at $29 Friday.

"There's just no wow," said Brian S. Sozzi, CEO of Belus Capital Advisors. "With an IPO in retail, you want a growth concept. Michaels is still a destination for fabric and household crafts. But online competition has grown substantially."

Michaels' IPO was originally supposed to happen two years ago but was delayed after its then CEO John Menzer resigned after a stroke.

The company has been late to the online party, launching its e-commerce business only this year.