The IPO Buzz: A Mediterranean Moonshot

CAVA Group (CAVA) opened at $42.00 in its NYSE debut today – up 90.9 percent from its $22.00 IPO price. The Mediterranean fast-casual restaurant chain’s stock rushed onward to score a moonshot. CAVA touched a session high of $46.75 to more than double its IPO price with a gain of 112.5 percent before noon EDT. CAVA’s first trade on the New York Stock Exchange was at 11:43 a.m. EDT on volume of 1.4 million shares, according to MarketWatch. By 12:28 p.m. EDT, CAVA’s stock had given up some gains to trade at $42.04. CAVA’s stock closed today (Thursday, June 15, 2023) at $43.78 – up $21.78 or 99.0 percent from its $22.00 IPO price – on its first day of trading.

CAVA’s dazzling debut came as the major U.S. stock indexes rallied a day after the Fed took a break from raising interest rates.

In CAVA’s case, IPO investors focused on its expansion plans and ignored the red ink on its balance sheet.

“This was all about the growth story,” a veteran IPO pro says.

CAVA Group priced its IPO on Wednesday night (June 14, 2023) at $22.00 – $2.00 above the top of its recently increased price range of $19.00 to $20.00. The company raised $317.78 million by pricing 14.44 million shares, the number of shares in the prospectus, at $22.00. At pricing, CAVA had a valuation of $2.45 billion.

Today’s moonshot briefly pushed CAVA’s valuation above $5 billion.

The above-the-range pricing and the valuation reflected IPO investors’ appetite for growth stories as the IPO market gradually recovers from a disastrous 2022. 

CAVA Group offers a Mediterranean menu on a “build your own” meal model that’s similar to Chipotle Mexican Grill (CMG). The Washington, D.C.-based company, which has strong revenue growth and a history of net losses, operates 263 restaurants in 22 states and the District of Columbia.

In the prospectus, CAVA said it plans to use the IPO proceeds to expand. Its goal is to open another 34 to 44 restaurants by late 2023 for a total of 300 restaurants in 24 states and D.C.