Mediterranean fare leads the IPO menu this week. CAVA Group (CAVA proposed), the Mediterranean fast-casual restaurant chain, increased its IPO price range to $19.00 to $20.00 – up from $17.00 to $19.00 initially – early today (Monday, June 12, 2023). The Washington, D.C.-based restaurant company kept the number of shares at 14.44 million. CAVA Group now expects to raise about $281.67 million. The deal is the only sizable IPO – in the $100 million-and-up class – set for pricing this week
The rest of this week’s IPO Calendar consists of six micro-cap deals. Two of those deals are carry-overs from last week.
J.P.Morgan, Jefferies, Citigroup, Morgan Stanley and Piper Sandler are the joint book-runners of Cava Group’s IPO.
CAVA Group plans to price its IPO on Wednesday night, June 14 – hours after the Fed’s interest-rate decision. Fed officials indicated in May that they may take a break and not raise interest rates at their meeting this week, according to a Bloomberg story published early today. The Fed raised its benchmark interest rate for the 10th time in May, pushing it above 5 percent for the first time since 2007, Bloomberg noted.
CAVA’s stock is expected to start trading Thursday, June 15, on the New York Stock Exchange.
The CAVA Group IPO is sailing into fairly friendly waters. The NASDAQ Composite Index climbed 202.7 points – a gain of 1.5 percent – to close today (Monday, June 12, 2023) at 13,461.92 as investors snapped up big tech stocks. The S&P 500 rose above its closely watched 4,325 mark, Bloomberg reported. The S&P 500 finished its second straight day of trading back in a bull market.
The S&P 500 broke out of the bear’s grasp last Thursday – exiting its longest bear market since 1948, according to MarketWatch.
Both the NASDAQ and the S&P 500 finished Monday’s session at their highest closing levels since late April 2022.
Wall Street’s focus early Tuesday (June 13, 2023) will be the release of U.S. CPI data for May, due at 8:30 a.m. EDT.
Greek Food, Mexican Model
“It’s similar to Chipotle,” a savvy IPO investor says of CAVA Group’s restaurant concept.
CAVA offers Greek and other Mediterranean food on a menu that lets customers “build your own” meal – like the customizable Mexican fare of Chipotle Mexican Grill (CMG).
Worth noting: Chipotle was profitable when it went public nearly 17-1/2 years ago. At the time, blue-chip McDonald’s Corp. (MCD) was Chipotle Mexican Grill’s biggest stockholder.
In contrast, CAVA Group has a history of net losses.
Chipotle, a Denver-based chain of about 500 restaurants, priced its IPO of about 7.9 million shares at $22.00 on Jan. 25, 2006. Chipotle closed its first day of NYSE trading on Jan. 26, 2006, at $$44.00 – doubling its IPO price to score a moonshot. (A moonshot occurs when an IPO gains 100 percent or more in its first day as a publicly traded company.)
In 2005, Chipotle earned net income of $37.7 million on total revenue of $627.7 million, SEC filings showed.
CAVA Group’s roots go back to the high school friendship of its three co-founders, the sons of Greek immigrants, the prospectus says. They opened their first CAVA Mezze in Rockville, Maryland, in 2006. In 2008, they began selling their dips and spreads to local grocery stores. In 2011, the company opened its first CAVA fast-casual restaurant.
Fast forward to 2018, when CAVA Group acquired Zoes Kitchen for about $300 million. The acquisition expanded CAVA’s reach into the Sun Belt and the suburbs, the prospectus says.
Working Up An Appetite
Cornerstone investors are in for up to $100 million of CAVA Group’s $281.67 million IPO. That leaves a little less than $182 million in stock to sell in the IPO.
CAVA’s IPO is whetting the appetite of IPO investors, who appear to be more than a little hungry after two weeks without any IPOs priced.
This deal marks the first big traditional IPO on the IPO Calendar since Atmus Filtration Technologies (ATMU) was priced on May 25, 2023. The Atmus IPO was priced at $19.50 – the mid-point of its $18.00-to-$21.00 range – on 14.12 million shares to raise $275.4 million. The mid-point pricing gave Atmus, a highly profitable company, a valuation of about $1.62 billion.
If CAVA Group’s IPO is priced at its new mid-point of $19.50, the company would have a valuation of about $2.17 billion.
Revenue Growth & Red Ink
CAVA Group’s financial statements show strong revenue growth offset by a string of net losses.
For fiscal 2022, CAVA Group reported a net loss of $59 million on total revenue of $564.1 million – compared with a fiscal 2021 net loss of $37.4 million on total revenue of $500.1 million, according to the prospectus.
For the 12 months that ended March 31, 2023, CAVA Group reported a net loss of $41.1 million on total revenue of $608.2 million.
CAVA plans to use the IPO proceeds to expand beyond its current footprint of 263 restaurants in 22 states and D.C. By the end of 2023, CAVA expects to have about 300 restaurants in 24 states and D.C., the prospectus says.
A week ago, CAVA Group launched its IPO in the afternoon. The Wall Street Journal described the deal as a major test of whether an unprofitable company could go public in today’s IPO market.
Stay tuned.
(For more information about these companies, please check the IPO Calendar and the individual IPO Profiles found on IPOScoop.com’s website.)
Note: Never trade on proposed symbols. They have been known to change and you might buy something on the OTC Bulletin Board.
To see what time the NASDAQ IPOs are expected to trade, please log in to: NASDAQTrader.com then scroll down to IPO Message.
Disclosure: Nobody on the IPOScoop.com staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The IPOScoop.com staff does not issue advice, recommendations or opinions.
Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums) is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO. The information offered is taken from sources we believe to be reliable, but we cannot guarantee the accuracy.