RPR&C In The Media


Law 360 – Shake Shack Boosts IPO Amid Strong Investor Appetites – Quote by Jerry Reisman

January 28, 2015 Posted in: RPR&C In The Media

Law 360

January 28, 2015

Shake Shack Boosts IPO Amid Strong Investor Appetites

By Chelsea Naso

New York-based Shake Shack Inc. plans to serve up a larger initial public offering, boosting its per-share price on Wednesday to land as much as $95 million amid investor hunger for the growing fast-casual, ingredient-conscious hot dog and burger chain.

Shack Shack increased its targeted per-share range to between $17 and $19 apiece, up from the $14 to $16 range the restaurant set earlier this month, according to a regulatory filing. At the high end of its former indicative range, Shake Shack would have raised $80 million.

The restaurant chain, which plans to list on the New York Stock Exchange under the symbol “SHAK,” will offer 5 million shares, or roughly 44.5 percent of its equity, in the IPO, giving the company a roughly $214 million valuation if its shares price at the high end of the increased range.

The offering could rake in an additional $14.25 million if the underwriters exercise their full overallotment option, according to the prospectus.

Shake Shack’s history stems back to 2001, when Union Square Hospitality Group LLC founded a hot dog truck to raise money for and foot traffic in New York’s Madison Square Park. After three summers of long lines, Union Square Hospitality Group left the cart behind for a more permanent kiosk, according to the prospectus.

In 2006, Shake Shack, which promises customers high-quality ingredients at an accessible price point in a clean environment, expanded to a second location and has continued to grow at a rapid pace. From 2010 to 2013, Shake Shack ballooned from seven locations in two states to 40 locations across six states, Washington, D.C,. and eight foreign countries, representing a 79 percent compound annual growth rate, according to the prospectus.

During that same period, total revenue climbed from $19.5 million to $82.5 million, representing a 62 percent CAGR, the company noted. Net income from 2010 to 2013 also grew from $200,000 to $5.4 million, and adjusted earnings before interest, taxes, depreciation and amortization grew $14.5 million, the prospectus said.

The restaurant chain today boasts 31 domestic company-owned locations, five domestic licensed locations and 17 international locations spread across the Middle East, Turkey, U.K. and Russia, according to the prospectus.

With a proven ability to grow its concept of finer dining experience in a casual atmosphere with midlevel pricing, it’s no wonder that investors are waiting in line to gobble up Shake Shack’s IPO, noted Jerry Reisman, a Reisman Peirez Reisman and CapoBianco LLP partner.

“The demand is occasioned by the fact that Shake Shake is landing in a market space where the finer fast-food industry is going,” he said. “Lines are forming around the corner at these Shake Shacks to purchase hamburgers, when in fact there are hamburger restaurants on every corner of Manhattan.”

Shake Shack isn’t the first fast-casual dining concept to drive investors into a frenzy, tapping into a consumer trend toward high-quality ingredients while maintaining a relatively low price point, just like The Habit Burger Grill, which saw a 120 percent first-day pop in November, and El Pollo Loco, which saw a nearly 23 percent first-day pop in July.

Both companies, however, pale in comparison to Mexican-inspired grill Chipotle Mexican Grill Inc., which priced at $22 per share in 2006, opened even higher at $45 apiece and trades trady for more than $720 per share.

Shake Shack is represented by a Latham & Watkins LLP team led by Howard Sobel, Gregory Rodgers and Ryan DeFord.

The offering’s underwriters, including J.P. Morgan and Morgan Stanley, along with Goldman Sachs, Barclays, Jeffries, William Blair and Stifel, are being represented by a Fried Frank Harris Shriver & Jacobson LLP team led by Daniel Bursky and Andrew Barkan.