Rule of 10: Shake Shack Inc (SHAK) IPO

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Rule of 10: Shake Shack Inc (SHAK) IPO

Rule of 10: Shake Shack’s IPO by Matt Brice, The SOVA Group

If there were ever an IPO where I had some special insight, it would be Shake Shack.  After Shake Shack opened a location about 10 blocks from our apartment in NYC, I probably ate there once a week.  If you saw me before the location opened and after, you might question the truthfulness of that last statement–perhaps I am slightly lowballing that figure.

Alas, I have no special insight, just a basic rule that I never use, but it makes for a good headline intro.  If you can name 10 competitors without the assistance of Google or any SEC filings, that’s probably not going to make the best investment.  Competition is great for the consumer, but bad for the capitalist.

Another rule of thumb, if your neighbor has thought about opening a certain kind of business, that’s probably not going to be a good investment (not your neighbor’s business, but that sector in general–But it probably also applies to your neighbor’s business as well).  How many people do you know that have thought about opening a restaurant or salon?  How many people do you know that have expressed their life-long interest in starting an industrial nuts and bolts distributor?

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Retail is an especially tough business.  The former owner of Diapers.com, which Amazon bought, has recently left and is now starting another web-based retail business, Jet.com, to compete with, you guessed it, Amazon.  See story here.

Some people will make a lot of money in these industries (more will lose a lot of money), but those fortunate people will have succeeded in jumping over 7-foot hurdles, an amazing feet that should be well-respected.  But who has time to train for those hurdles when Shake Shack is calling my name…

Picture below with my kids at the beloved 86th Street Shake Shack in Manhattan.  Judging by the picture, the location had just barely opened…

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The Sova Group is a private investment fund managed by Matt Brice. As principal of The Sova Group, Matt Brice has been managing investments since 2009. Prior to founding The Sova Group, from 2007 until 2009 he worked as an associate attorney in the Mergers and Acquisitions group of Debevoise & Plimpton LLP, an international law firm based in New York City. Mr. Brice holds a B.A. in Philosophy from Brigham Young University and received his law degree from Columbia Law School.
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