2023-06-15 06:22:33 ET
The IPO market is showing some signs of life after waves of economic uncertainty and a monetary policy tightening cycle that put the brakes on going public. There have been 44 IPOs in the U.S. this year that have raised $7.3B, which are soon set to overtake last year's 71 IPOs that raised $7.7B, according to Renaissance Capital. It still pales in comparison to the bumper listings of 2021, whose 397 IPOs raised $142.4B, highlighting that the market is still a ways away from a full comeback.
Add some harissa: Fast-casual Mediterranean restaurant chain Cava will become the latest to test the waters today as some bullish sentiment returns to Wall Street. Shares have been priced above range at $22 , raising almost $318M and valuing the company at about $2.45B. The company is set to list on the New York Stock Exchange this morning under ticker symbol "CAVA," using proceeds from the offering to fund future new restaurant openings and general corporate purposes, such as loan repayments, construction and capital expenditures.
"The concept is not yet GAAP profitable but has very intriguing restaurant-level metrics that suggest significant potential as they scale," writes SA analyst Kingdom Capital . One of the key figures to analyze is whether Cava can emulate Chipotle's ( CG ) growth and margins and avoid the cash burn and price decline of Sweetgreen ( SG ), which was the last restaurant to go public in late 2021. Citing some red flags, David Trainer takes a more skeptical stance on the company, reiterating a warning based on a reverse discounted cash flow model and bloated valuation.
Outlook: Many of the IPOs coming to market have different fundamentals, with Cava's set to size up investors' feelings about growth-oriented companies that are still not turning a profit. It logged a net loss of $59M in fiscal 2022, widening from the $37.4M loss in the prior year, though its revenue growth rates and new location expansions have been noted in the filing. For those looking for exposure to the broader IPO industry, the Renaissance IPO ETF ( NYSEARCA: IPO ) has returned 32% this year, compared to the 14% gain of the S&P 500.
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Return of the IPO? All eyes on Mediterranean restaurant chain Cava