Burger chain Shake Shack boosts its IPO terms ahead of market debut
Shake Shack has raised the expected pricing for the company’s initial public offering by $3 to a new range of $17 to $19 per share, a move that comes two days before the burger chain is expected to list.
The restaurant chain, which is expected to debut on the New York Stock Exchange this Friday, is offering 5 million shares in a deal that Reuters estimates could value Shake Shack at about $674.5 million if the top end of the expected price range is achieved. When Shake Shack first disclosed estimated pricing terms about a week ago, the range was between $14 and $16 per share.
IPOs from restaurants and grocery stores are often a feast for investors. On average, “fast casual” restaurants chains that have debuted publicly over the past ten years have reported a 95% leap to their list price on the first day of trading, according to data by IPO ETF manager Renaissance Capital. For example, when Chipotle (CMG) listed its shares in early 2006, the stock doubled on the first day.
However, investors should be wary. Some fast-casual chains have found it hard to keep their stocks above their lofty debut prices after investors get a better look at their quarterly results. Shake Shack, which generated nearly $79 million in so-called “Shack sales” for the first nine months of 2014, has grown quickly, although sales increases at the company’s existing locations have slowed.
Shake Shack’s shares are scheduled to be priced on Thursday after the close of trading, and they are expected to begin trading on Friday on the New York Stock Exchange under the symbol “SHAK.”