Shares in the US restaurant chain, Cava, experienced an impressive surge of nearly 100% on their debut in New York. This success has ignited hopes that it will inspire other businesses to go public, potentially ending a period of limited access to capital.
According to data provider Dealogic, Cava’s performance on its first day surpassed that of any US initial public offering over $300 million in the past two years.
Cava, known for its Mediterranean-style cuisine and commitment to wholesome and ethical food, raised a substantial $318 million from its initial public offering. As a result, the company’s market capitalization now stands at $4.9 billion, despite its history of financial losses.
Remarkably, Cava achieved these gains despite setting aggressive pricing. Even after increasing the offering price range, the shares were ultimately priced 10% higher than the upper limit at $22 per share.
On Thursday, the company’s shares reached an impressive 99% increase, reaching $43.78.
While the S&P 500 has experienced a 15% growth this year, market sentiment has been uncertain due to concerns about a potential recession and the reliance on a small number of tech giants like Nvidia, Microsoft, and Amazon.
Just hours before Cava finalized its deal, the Federal Reserve decided to maintain interest rates at their current level — an important development after 15 months of continuous increases.
According to Dealogic, this year’s IPOs in the US have raised a total of $8 billion. Although approaching 2022’s total of $8.6 billion (a year when the US markets experienced significant decline), it is still far from the boom in 2021, which saw $154 billion raised.
Bankers are advising caution and not expecting a rush of IPOs.
“I anticipate a gradual reopening of the market rather than a sudden influx,” commented Brittany Collier, Head of Consumer and Retail Equity Capital Markets at JPMorgan. “However, there is clearly an appetite for high-quality companies.”
JPMorgan, in collaboration with Jefferies, oversaw the Cava IPO, but Collier declined to comment on the specific transaction.
The IPO drought is not limited to the US. Globally, companies have raised $56 billion, experiencing a decline of nearly 25% compared to this time last year and a staggering 70% drop from the 2021 boom.
In London, soda ash producer WE Soda withdrew plans to go public and sell shares worth up to £1 billion. This decision came after investors showed hesitation towards the desired price, and it was originally expected to be the largest initial public offering in the UK this year.
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