Cava’s initial public offering (IPO) popped on Thursday, adding to the rush on Wall Street as markets soar this week.
Shares for the restaurant chain closed up 99%, nearly doubling in value. Cava had earlier aimed for a stock price offering of between $17 and $19 per share, but last Monday raised its target range to $19 to $20.
The Mediterranean fast-casual eatery saw its valuation nearly double in under 24 hours. Its price catapulted overnight from its Wednesday evening IPO share price of $22 to close at over $43, bringing its total valuation to around $4.8 billion. This makes Cava the sixth-largest deal so far for U.S. markets in 2023.
The big buy-up could also be an early sign of a thawing in the IPO market. The last 18 months being the slowest IPO market since the 2008 financial crisis, and public offerings have yet to really reemerge from the deep freeze. It also shows the bullish appetite on Wall Street for growth in the highly competitive fast-casual dining sector. If more food deals land, investors could be lining up for seconds.
“A successful IPO from Cava should open the door to more restaurant IPOs,” Matt Kennedy, senior strategist at Renaissance Capital, told CNBC. “It’ll show that investors are interested in the space, and companies can get a certain valuation in the public markets.”
The fast-casual Mediterranean-style chain serves up customizable grain bowls, salads, and pitas in the build-your-own meal style of Chipotle Mexican Grill. The Cava brand’s line of dips and spreads, including spicy hummus, harissa sauce, red pepper feta dip, and tahini dressing, can also be found on shelves at grocers like Whole Foods.
As of mid-April this year, there were 263 Cava stores nationwide, according to the company’s updated prospectus. Cava acquired restaurant franchise Zoë’s Kitchen for $300 million in 2018 and is now converting former Zoë’s outlets into Cava stores. Through this process, as well as opening wholly new Cava stores, it aims to operate more than 1,000 locations in the U.S. by 2032.
Despite the stellar success of its stock market debut, the company remains unprofitable. In the 12 months ending on March 31, 2023, Cava cooked up total revenues of $608 million yet remained $41 million in the red.
CEO Brett Schulman told Fortune this week that Cava’s investment in manufacturing infrastructure and its store expansion plans will pave the way to profitability. “I think public markets are always welcoming to long-term, sustainable category-defining growth stories,” he said.
Whether or not investors will also stay the course with Cava as it strives toward profitability remains to be seen. Yet for IPO investors desperate to see signs of life in the public offering space, the Cava deal is certainly something to celebrate.
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