I don't understand this company.
Yahoo says they have a market cap of 1.16 billion dollars. They have 63 stores and before the IPO said this:
>The New York-based company plans to use the proceeds from the IPO to repay debt, as well as open new stores and renovate existing ones. Shake Shack is selling 14 percent of the company through the IPO.
So 63 stores are worth 8.3 billion!
That is an insane evaluation.
Also to repay debt and to renovate stores. Are you kidding me? So they aren't even going to use the IPO money to go national. You know, the one thing you are supposed to do!
Where is that guy that was pushing SHAK last year? I need to talk to you.
What you say has to be true. I didn't read their prospectus or quarterly reports. That's why I want that stock pusher to weigh in. Still I don't see how it could be a good investment when they aren't opening multiple stores every day.
I think it reflects confidence in Union Square Hospitality Group as a whole, rather than just the Shake Shack brand. Probably overvalued as often with IPOs, but on the long, the brand is solid, and decreasing debt may be better for revenue than opening new stores with more borrowed money.
>What do you mean different guy?
They mean they aren't you. Pointless because biz has id's.
I just don't like they they basically had probably only 30 restaurants before they were thinking of getting rich off an IPO. And they were in debt!
Keep in mind that stocks are priced at expected value, not necessarily the current value. So for whatever asinine reason investors think Shake Shack / Parents is worth that much.
Also fast food chains that rely on "quality" as part of the brand need to be very careful when expanding because of supply chain concerns and other potential problems.
Chipotle went from 16 to 500 restaurants in 7 years.
>I dare you to do better
>Shake Shack’s prospectus includes a complicated diagram with ovals, triangles, boxes and arrows that graces a section called “Organizational Structure Following This Offering.”
>In fact, this ”organization structure” describes how the IPO will alter the company’s legal structure. The IPO will transfer a 31.6% stake of a limited partnership called SSE Holdings — which controls the business – into the hands of Shake Shack.
>If you buy into this IPO, you will be providing cash ”to buy common membership interests of SSE Holdings LLC, which is the predecessor of Shake Shack for financial purposes,” according to Reuters. Your proceeds will also go to repaying a $22 million loan, according to the prospectus.
>To compound the complexity, one of the IPO underwriters has a conflict of interest. That’s because J.P. Morgan Securities is one of the lenders under a “Revolving Credit Facility and will receive more than 5% of the net proceeds of this offering due to the repayment of outstanding borrowings,” according to the prospectus.
No, you do not understand what market cap is. The IPO diluted the entire pool of common shares by 14%, but the market cap figure that you cited is the value of 100% of the common shares. That's what market cap is.
You're not understanding that market cap = the value of 100% of the shares, not just the new shares that were issued in the IPO. $1.16 billion = the value of the 14% new shares + the 86% existing shares.
I don't know anything about Planet Fitness, so I'm not sure what you're getting at here. All I'm saying is the market cap is $1.16 billion and that is the figure that you should be using as your valuation baseline. There is no reason to multiply that by 7 unless you are curious what 7 times SHAK's market cap is.
Okay, I actually looked it up, and you are right. There are two classes of shares, Class A and Class B. Class B does not have economic rights. Yahoo has incorrectly included the Class B shares in its calculation of market cap. The market cap should be 15 million Class A shares x ~$32/share, so $480 million. Not $1.16 billion.