KinderCare just became a public company. Can it fix the childcare shortage?

Early childhood education provider KinderCare (KLC) hit the public market on Wednesday. The IPO came at a timely moment as the high cost of childcare has gained attention ahead of the US election.

KinderCare, the largest private provider of early childhood education, debuted under the ticker "KLC" on the New York Stock Exchange at $24 per share. The price was at the low end of the expected range of between $23 and $27 and valued the company at $2.75 billion.

KinderCare stock climbed 16% in its first trading week to settle at $28 as of the close Friday.

CEO Paul Thompson told Yahoo Finance that the company was "really pleased" with where it was at and said it was "focused on the long term," with growth ahead for the organization.

Wednesday marked the second time the company sought to make a public debut; it had previously pulled back IPO plans in 2022. Following the IPO this week, the Swiss private equity firm Partners Group still maintained a controlling interest in the company, owning roughly 70%.

KinderCare brought in $2.5 billion in revenue, $102.6 million in net income, and $266.4 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in fiscal year 2023.

The company plans to use the proceeds to pay back debt. As of June 29, the company had $1.5 billion in outstanding debt, plus $104.2 million available for borrowing under its credit facilities and outstanding letters of credit of $55.8 million.

"Most of [the IPO proceeds are] going to paying down debt," Thompson said. "That was an interest of ours to get our leverage where we wanted it to be in a public market."

Despite the favorable reaction in its first week as a public company, not all investors are sold on the stock.

New Constructs founder and CEO David Trainer is skeptical about KinderCare, telling Yahoo Finance over the phone that investors should "wait it out at a minimum," but they "probably never want to be in this."

"It appears to be quite unprofitable and very expensive stock as well," Trainer said, raising concerns over the amount of outstanding debt the company holds. "We're seeing a very highly indebted business ... It looks like a private equity bailout."

The competitive landscape in childcare

According to S&P Global Ratings senior analyst Carlee Martineau, all childcare providers have benefited from increased occupancy due to high demand for day care and backup care.

KinderCare is the largest private childcare provider in the US, with 2,000 early childhood education centers that create the capacity to care for over 200,000 children. Thompson noted there's a "lot of opportunity" for KinderCare to serve more families beyond the 40 states and District of Columbia, where it operates today.