Shake Shack (SHAK) Files for Initial Public Offering

Shake Shack, a modern day burger chain established by restaurateur Danny Meyer filed for an initial public offering (IPO).

Based on its Form S-1 filing with the Securities and Exchange Commission (SEC), Shake Shack will be trading its shares at the New York Stock Exchange (NYSE) under the symbol “SHAK.” The burger chain intends to offer 100 million shares during its IPO.

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Union Square Hospitality Group owns Shake Shack, Gramercy Tavern and Marta, a pizza restaurant. The company is backed by private equity firm, Leonard Green & Partners LP.  Last September, some people familiar with Shake Shack’s IPO indicated that the company’s valuation could reach as much as $1 billion.

Based on the company’s website, Shake Shack started as a hot-dog cart at Madison Square Park in New York. The company opened its first permanent kiosk at the par in 2004.  At present, Shake Shack has 63 locations and it is opening its restaurants in Florida, Pennsylvania, United Kingdom and Middle East.

Shake Shack financial performance

Shake Shack said its compounded annual growth rate (CAGR) was 79% for the past three fiscal years ended December 25, 2013.  The company reported that its company-operated shacks had AUVs of approximately $5 million.

The company said its Manhattan shacks had approximately $7.4 million AUVs while its non-Manhattan shacks had around $3.8 million in AUVs.

Shake Shack believed it is well-positioned in the burger market

Shake Shack is part of the burger market within the restaurant industry. The burger market is the largest dine-out segment in the United States with more than $72 billion sales last year. The company estimated that the global burger market size is around $135 billion.

“With the majority of the burger restaurant segment comprised of quick service restaurant competitors, we believe that Shake Shack is well positioned to take market share, as we believe consumers will continue to trade up to higher quality offerings given an increasing consumer focus on responsible sourcing, ingredients and preparation,” according to Shake Shack.

Shake Shack plans for the proceeds from IPO

Shake Shack plans to use the proceeds of the offering purchase from SSE Holdings, which the company refers to as LLC Interests. The company explained that there is no public market for the LLC Interests and it is equivalent to the public offering price of its Class A common stock.

Shake Shack said it will own a minority economic interest in SSE Holdings, but it will be the sole managing member of the firm and it will operate and control all of its business and affairs.

Shake Shack said its total revenue increased from $19.5 million to $82.5 million while its net income rose from $0.2 million to $5.4 million. Its adjusted EBITDA climbed to $14.5 million.