By Corrie Driebusch
Shares of Shake Shack Inc., a restaurant chain known for its
burgers and crinkle-cut fries, jumped as much as 150% Friday in
their market debut, indicating the appetite that investors have in
so-called fast-casual restaurants.
The stock opened at $47.21, 125% above its initial public
offering price of $21, and quickly hit a high of $52.50 before
retreating. The shares, which trade on the New York Stock Exchange
under the symbol "SHAK," moved at $48.90 in late morning
trading.
Investors have eagerly bought-up newly-listed shares of
fast-casual restaurants, in part on a bet that consumers will be
spending more money eating out as falling gas prices leave more
money in consumers' pockets after filling up their car's gas
tanks.
In Shake Shack's case, investors say, another attraction is the
company's growth plans. The company catapulted onto the dining
scene more than a decade ago as a hot dog cart in a Manhattan park
and still has a fairly small footprint, operating 63 restaurants.
However, Shake Shack plans to open at least 10 new domestic
company-operated restaurants each year, beginning in fiscal 2015,
and expects to grow to at least 450 domestic Shake Shacks.
The interest in Shake Shack comes as the world's largest burger
chain, McDonald's Corp., recently changed its leadership amid
worsening sales declines in its core U.S. market. The declines have
been blamed in part on fast-casual restaurants like Shake Shack
that are winning younger consumers with fresher and more customized
offerings.
Shake Shack's first-day rise in stock price exceeds the opening
pop of Habit Restaurants Inc., a burger chain that went public in
November. Its shares soared 120% in its first day of trading.
The IPO deal, which was led by J.P. Morgan and Morgan Stanley,
raised $105 million by selling 5 million shares, and gave the chain
a valuation of roughly $745.5 million.
That total doesn't count a so-called overallotment option, which
gives underwriters the opportunity to sell additional shares under
certain circumstances.
Earlier this week, Shake Shack increased its price range to $17
to $19 a share from $14 to $16 per share, its original range.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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