This post is part of the On the Margin blog.
Shake Shack, Inc., has pretty much executed a restaurant IPO to perfection, as evidenced by today’s filing of a secondary offering, in which early investors in the company are cashing out.
The fast-casual burger chain went public in January to great fanfare, with an IPO that was arguably the most successful offering in restaurant industry history — better, even, than the 2006 IPO of Chipotle Mexican Grill.
Like many such IPOs, Shake Shack offered only a small number of shares, which surged in value thanks to the IPO’s enthusiastic demand.
The stock surged to ridiculous heights, threatening to hit triple digits at one point in May when the stock reached an all-time high of $96.75. Even though the stock has been cut in half since, it remains among the most valuable restaurant stocks on the public market in terms of valuation.
And now pre-IPO investors in the company are converting shares and might sell them in the offering.
According to the filing, Shake Shack investors are selling up to 26.16 million shares at $47.28 per share, after early investors convert 21 million shares of Class B stock to Class A shares. The price was a slight discount on the closing price Wednesday, of $48.48.
Shake Shack stock fell about 6 percent this morning on the news.
Some big early investors in the chain may sell shares as part of the secondary, including Leonard Green Partners, which could sell about 5 million shares in the offering.
The chain’s founder, Danny Meyer, could also sell as part of the offering. He could sell as many as 1.2 million shares, which would leave him at just over 30,000 shares of the company’s stock.
The company itself is not selling shares in the offering, which could raise as much as $1.2 billion for investors. Not bad for a company with 71 locations.