As Shake Shack Preps IPO, A Look at Restaurant Stock Debuts
Shake Shack's imminent IPO has become the talk of Wall Street and the financial press. Restaurateur Danny Meyer's burger and custard empire began as a literal shack in New York's Madison Square Park and, by taking advantage of the hunger for refined fast food, now counts 60 stores worldwide, with half of them abroad (and concentrated in the Middle East). With its IPO pricing due this afternoon, the company has hinted at a range of $17 to $19 a share, up from earlier projections of $14 to $16.
But while the hype is certainly real, the history of restaurant IPOs demonstrates that even the biggest darlings of the Street are subject to rapidly shifting fortunes.
Boston Chicken (1993)
IPO: $10 per share
The rotisserie chicken company later renamed Boston Market claimed one of the best debuts in history by surging an extraordinary 140%, to $24.25, from its split-adjusted offering price. However, its glory was fleeting and the chain became the bad kind of B-school case study when overly aggressive expansion led to a 50% stock tumble in 1997 and bankruptcy protection the following year.
Chipotle (2006)
IPO: $22 per share
The upmarket Mexican chain wowed Wall Street when share prices soared by 100% in its first day of trading. Thanks to a nationwide shift in fast food tastes toward the locally sourced and personalized, Chipotle avoided Boston Chicken's fate and currently trades at over $700 per share.
Dunkin Donuts (2011)
IPO: $19 per share
Long a New England staple, the fast-expanding DD climbed an impressive 47% in its Wall Street premiere, closing at $27.85. The chain is now focused on penetrating the picky California caffeine market on its way to a goal of 15K American locations. Its stock currently trades in the mid-$40s.
Potbelly (2013)
IPO: $14 per share
The Chicago-based sandwich shop, like Chipotle a forerunner of the fast-casual market, was a hero in its debut, improving by 120% to close at $30.77 for the second-best IPO performance of 2013. But in another case of restaurant sector fickleness, its stock plummeted just months later, to a low of $10.95 last summer on the heels of disappointing earnings reports.
Habit Restuarants (2014)
IPO: $18 per share
This California charburger and shake retailer is close in spirit to Shake Shack. It floated shares last November, and has since climbed nearly 80%. But its modest, local expansion so far—its 98 stores are contained within four states—is at odds with Shake Shack's global growth. And that, if history is any indication, could prove to be the Shack's undoing.
