A banner for Mediterranean restaurant chain Cava is displayed outside the New York Stock Exchange (NYSE) as the company goes public on June 15, 2023 in New York.
Spencer Platt | Getty Images
Shares of a chain of Mediterranean restaurants Cava rose as much as 117% in its market debut on Thursday.
The company’s stock closed at $43.78 per share, up from an initial trade of $42 per share. Its closing price gives it a market value of $4.88 billion, making it the best-performing IPO this year for companies valued above $500 million.
Cava group priced its IPO on Wednesday at $22 per share, above the expected range of $19 to $20. The company sold 14.4 million shares, raising nearly $318 million and initially valuing the restaurant chain at about $2.45 billion.
The shares trade on the New York Stock Exchange under the symbol “CAVA”.
Although founded in 2006, Cava opened its first fast-casual location in 2011, modeling its own Mediterranean dishes on a recipe they’ve grown to love Chipotle Mexican Grill. The chain built a customer base by introducing ingredients like harissa and tahini to some diners and positioned itself as a healthy, convenient option. The company also sells its dips, spreads and salad dressings in grocery stores.
Cava won 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, adding to its footprint of 263 locations as of April 16.
Last year, Cava’s net sales climbed to $564.1 million, up 12.8% from a year earlier.
“You’re seeing an inflection point in the business and this whole robust structure that we’ve invested in, restaurant growth, that’s starting to catch on and put a tailwind in the business,” CEO Brett Schulman said on CNBC.Shouting in the street.”
But its losses also widened 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 for growth stocks. It reported a net loss of $2.1 million in the first quarter, down from its net loss of $20 million in the year-ago period.
The restaurant company plans to use the proceeds from the IPO to open new locations and for general corporate purposes.
Cava joins a growing number of publicly traded fast food chains. Chipotle, the industry leader, debuted on the public market back in 2006, and its market value has grown to $56.9 billion.
Recently, in November 2021, the salad chain Sweetgreen went public. It now has a market value of $1.2 billion. Investors have hammered the stock because of the company’s lack of profit, though the stock has climbed more than 25% this year.
Cava debut could prepossess other restaurant chains to follow suit and help break the IPO market drought. Brazilian steakhouse Fogo De Chao and Korean barbecue chain Gen Restaurant Group have filed confidential regulatory filings, while both Panera bread and Fat Brands’ Twin Peaks shares plans to issue an initial public offering in the near future.