A banner from Mediterranean restaurant chain Cava will be displayed outside the New York Stock Exchange (NYSE) when the company goes public on June 15, 2023 in New York City.
Spencer Plat | Getty Images
Shares of Mediterranean restaurant chain Cava rose as much as 112% in its market debut Thursday morning before giving up some of those gains.
The stock opened at $42 per share, giving the company a market value of $4.68 billion. After rising even higher, the shares are trading around $41, still more than 85% above the initial public offering price.
Cava Group priced its IPO at $22 per share on Wednesday, above the expected range of $19 to $20. The company sold 14.4 million shares, raised nearly $318 million and initially valued the restaurant chain at about $2.45. billion.
The shares trade on the New York Stock Exchange under the ticker symbol “CAVA”.
Although it was founded in 2006, Cava opened its first fast-casual location in 2011, modeling its homemade Mediterranean meals on the formula popularized by Chipotle Mexican Grill. The chain built a customer base by introducing some diners to ingredients like harissa and tahini and positioning itself as a healthy and convenient option. The company also sells its dips, spreads and salad dressings in supermarkets.
Cava acquired Zoes Kitchen in 2018, taking the rival Mediterranean chain private for $300 million. It has spent the past five years converting Zoes Kitchen locations into Cava restaurants, contributing to its footprint of 263 locations as of April 16.
Last year, Cava’s net sales rose to $564.1 million, 12.8% higher than the year before.
“You see the tipping point in the business, and all that robust structure that we’ve invested in, the growth of the restaurant, is starting to take hold and drive tailwinds to the business,” CEO Brett Schulman said on CNBC’s “Squawk on the Street.”
But losses also mounted from $37.4 million in 2021 to $59 million in 2022. Still, industry experts say the chain has shown a clear path to profitability, making it more attractive to investors looking to growth stocks. In the first quarter, it reported a net loss of $2.1 million, smaller than its net loss of $20 million in the same period a year ago.
The restaurant company plans to use proceeds from the IPO for new location openings and general corporate purposes.
Cava contributes to the growing number of listed fast-casual chains. Industry leader Chipotle made its public market debut in 2006 and saw its market capitalization grow to $56.9 billion.
More recently, salad chain Sweetgreen went public in November 2021. It now has a market value of $1.2 billion. Investors have denounced the stock due to the company’s lack of earnings, even though shares are up more than 25% this year.
Cava’s debut could inspire other restaurant chains to follow suit, helping to break the IPO market drought. Brazilian steakhouse Fogo De Chao and Korean barbecue chain Gen Restaurant Group both filed confidential paperwork, while both Panera Bread and big brands’ Twin Peaks has shared the intention to issue an IPO in the near future.
This is the latest news. Check back later for updates.