Shake Shack (SHAK) Stock Falls After A Massive Dilution

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Three times the float!!

Shake Shack is trading lower today after filing to sell 26,160,694 shares of its Class A common stock. The stock price of the burger chain operator dropped nearly 6% to $46.65 per share at the time of this writing around 1:31 in the afternoon in New York. The once hot IPO is sending signals which might make some owners a bit hesitant today.

According to the company, the offering will be conducted by its selling shareholders. It will not receive any proceeds from the sale, which will occur from time to time.

The selling shareholders may offer and sell 5,124,114 restricted shares of Class A common stock. Shake Shack said it would convert all of its 21,036,580 Class B shares into Class A shares. All the holders of those shares will also offer and sell them from time to time after the conversion.


Shake ShackShake Shack selling shareholders

Mr. Leonard Green, a private equity investor and his affiliates, which collectively own around 20% of Shake-Shack are among the selling stockholders. Mr. Green filed to sell most of their equity interest based on the regulatory filing.

Shake Shack founder and CEO of Union Square Hospitality Group, Daniel Meyer will also reduce his stake in the burger chain operator by 30,000 shares.

According to Shake Shack, its selling shareholders may offer and sell Class A common stock through one or more underwriters, broker-dealers or agents.

The selling shareholders will be responsible for underwriting discounts or commissions if the shares are sold through underwriters or broker-dealers. Its stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at different prices at the time of the sale, or at negotiated prices.

Shake Shack stock performance

Shake Shak debuted at the New York Stock Exchange (NYSE) in January. The company offered its stock at $21 per share and raised $105 million after selling 5 million shares during its initial public offering (IPO).

The company’s stock price reached as high as $96.75 per share in May. However, the stock dropped since then particularly when CNBC’s Jim Cramer warned that it became a “cult stock” or “Tesla for burgers.”  Shake Shak’s last reported stock price was $48.48 per share yesterday, October 7.

Analysts at Jefferies recently issued a report indicating that the shares of Shake Shack are poised to climb. The firm reiterated its Hold rating on the stock with a price target of $60 per share.

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