By Linda McDonough

As avid consumers of the Skinny Pop brand of popcorn, we were eager to read about the company’s growth in its IPO prospectus.  We had only recently been introduced to the brand and since our first handful have been tossing multiple bags into our cart during each trip to the grocery store.

If only the stock looked so delicious.  Unfortunately Skinny Pop’s owner, Amplify Snack Brands (Nasdaq: BETR), is now saddled with debt taken on to compensate its private equity owners. Amplify, which went public on August 5th at $18, could have been an exciting growth story.  Unfortunately, TA Associates, the private equity firm who purchased the company in June 2014, loaded it up with debt and hoped for a quick exit.

In its few days as a public company the stock has never traded above its IPO price and has settled in around $14.00.

Amplify more than tripled sales in 2013. Although Amplify had been enjoying astronomical growth rates in 2013, this growth may have been the exact reason the company fell into the arms of a private equity buyer. Exponential growth like this is hard to manage, leaving many small business owners and founders swamped with operational headaches.  

Enter the white knight, TA Associates.  In June 2014 the company teamed up with insiders and purchased the company for $320 million, $150M of which was funded by debt taken on by the company.  Another $82 million in debt was added to the company’s balance sheet to fund special dividend payouts to TA.  

All 15 million shares sold at the IPO were from TA Associates.  This investor still owns 56% of shares outstanding after the deal.  It is common for a young company to offer company shares alongside insider shares on a deal in order to bulk up its cash balance. Unfortunately Amplify chose not to do this, leaving the company with a meager $6 million in cash as of June. Investors buying the stock now need to hope that the company can fund growth internally.

It’s possible that Amplify can ramp up growth with its new BFY (better for you) tortilla chip that it just acquired in April.  Skinny Pop sales continued to grow 50% in the first half of this year. However, massive interest payments brought on with the TA debt eat up a good portion of profits.

Now that Amplify has gotten the big payouts to TA out of the way, the company can begin to rebuild earnings. I’d put Amplify on the back burner for now but watch the company for signs of improved profitability.