Reporter's Notebook
Shake Shack files for a secondary offering

Shake Shack files for a secondary offering

This post is part of the Reporter’s Notebook blog.

Shareholders in Shake Shack Inc. are cashing in some of their shares.

The fast-casual burger chain on Monday announced plans for a secondary offering. Shareholders are selling 4 million shares of stock, according to SEC filings.

The initial reaction from Wall Street wasn’t positive. Shake Shack's stock fell 6 percent in after-hours trading.

Various shareholders selling stock in the company include Green Equity Investors, chairman Danny Meyer, SEG Partners and CEO Randy Garutti, among others. The shareholders would sell shares for as much as $51.41, at which they would make more than $200 million in the offering.

The secondary had been expected, as the lockup period preventing company insiders from selling shares was slated to expire next week. And shareholders typically sell shares as that period expires.

Shake Shack went public in January at $21 a share and closed that day at $45.90, up more than 100 percent. At its peak, the stock was trading above $96 a share and many felt it was headed for triple digits. But concern about the end of the lockup period, and Shake Shack’s valuation, have led to a steep decline since.

The stock today closed $54.79, up slightly in the past couple of weeks but is down more than 43 percent since its 52-week high.

Even after the decline, it still has a nearly $2 billion market cap and is trading at an enterprise value multiple of more than 51 times trailing cash flow, which make it among the most highly valued restaurant stocks on Wall Street. That valuation led to analyst downgrades, including a rare “Sell” rating from Goldman Sachs.

Still, the chain remains a growth concept with an extraordinary perception among customers and name recognition far beyond its 71 global locations, 37 of which are in the U.S. Systemwide sales grew 55 percent last year, to $217 million from $140 million. Same-store sales in the first quarter ended April 1 rose 11.7 percent.

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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