Last week, one of the most delicious restaurants in the world went public when Shake Shack’s debut hit the market.
We may be slightly biased here in NYC, as we’re able to visit one of its several area locations for lunch every day, but based on the first-day performance, we’re not alone. The New York-based, but rapidly expanding, Shake Shack outperformed its offer price by 118.6% on the day of its debut.
Yes, the food is good, and the chain is growing, but that’s not the only reason Shake Shack outperformed its valuation so strongly: it’s riding the flair-accessorized coattails of its sector. The Restaurant & Eateries industry has been sizzling lately.
Since 2012, 12 debut from the space have raised a total of $1.3B in proceeds, with an average capital raise of $106.8M. Restaurant premieres have widely outperformed the broader IPO market over this timeframe, with the average debut returning 53.9% on its first day of trade, as compared to 15.3% across all IPOs during this period. Furthermore, none of the 12 restaurant IPOs to price since 2012 have ended their opening sessions in the red.
Recently, burger chain The Habit boasted one of 2014’s standout performances, rising 119.7% on its opening day and landing in fourth place as one of 2014’s biggest first day pops – Shake Shack’s 118.3% rise makes it the fifth-highest first-day performer of the past 12 months). In 2013, restaurants Potbelly (+119.8%) and Noodles & Co. (+104.2%) posted the third and fourth best first day performances, respectively. The average restaurant IPO has been trading at 56.1% above offer, compared to 46.4% across all IPOs.
In 2014, investors spent the year getting healthy with healthcare. Based on early 2015′s restaurant boom, it looks like their diets are over.