A banner for Cava, a Mediterranean restaurant chain, is proudly displayed outside the New York Stock Exchange (NYSE) as the company goes public on June 15, 2023, in New York City.
Image Credit: Spencer Platt | Getty Images
Cava, the Mediterranean restaurant chain, experienced a remarkable surge of up to 117% in its market debut today.
The company’s stock closed at $43.78 per share, surpassing its opening trade price of $42 per share. With a closing price that attributes a market value of $4.88 billion, Cava’s initial public offering has become the top-performing IPO for companies valued above $500 million this year.
Cava Group priced its IPO at $22 per share on Wednesday, which exceeded the expected range of $19 to $20. The company successfully sold 14.4 million shares, raising almost $318 million and initially valuing the restaurant chain at approximately $2.45 billion.
The stock is now listed on the New York Stock Exchange under the ticker symbol “CAVA.”
Although Cava was established in 2006, it opened its first fast-casual location in 2011, following the successful build-your-own Mediterranean meal concept introduced by Chipotle Mexican Grill. By offering ingredients like harissa and tahini and positioning itself as a healthy and convenient option, Cava quickly gained a loyal customer base. Additionally, the company’s dips, spreads, and salad dressings are available for purchase in grocery stores.
In 2018, Cava acquired Zoes Kitchen, a rival Mediterranean chain, for $300 million, effectively taking it private. Over the past five years, Cava has converted Zoes Kitchen locations into Cava restaurants. As of April 16, Cava boasts a footprint of 263 locations.
Last year, Cava achieved net sales of $564.1 million, representing a 12.8% increase compared to the previous year.
CEO Brett Schulman, appearing on CNBC’s “Squawk on the Street,” stated, “You’re witnessing the pivotal moment in our business, with all the substantial investments made in restaurant growth finally yielding positive results and driving favorable conditions for our business.”
Despite experiencing widened losses from $37.4 million in 2021 to $59 million in 2022, Cava has successfully demonstrated a clear path to profitability. This factor has enhanced its appeal to investors seeking growth stocks. In the first quarter, Cava reported a net loss of $2.1 million, a narrower figure compared to the $20 million net loss in the same period of the previous year.
The proceeds from the IPO will be utilized by the restaurant company for new location openings and general corporate purposes.
Cava contributes to the growing presence of publicly traded fast-casual chains. Chipotle, a sector leader, made its public market debut in 2006 and has since seen its market value soar to $56.9 billion.
More recently, salad chain Sweetgreen went public in November 2021, currently boasting a market value of $1.2 billion. Although investors have criticized Sweetgreen for its lack of profitability, the company’s shares have risen by over 25% this year.
Cava’s successful public debut may inspire other restaurant chains to follow suit, potentially revitalizing the IPO market. Brazilian steakhouse Fogo De Chao and Korean barbecue chain Gen Restaurant Group have confidentially filed regulatory paperwork, while Panera Bread and Fat Brands’ Twin Peaks have expressed intentions to issue an initial public offering in the near future.
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