Cava, a Mediterranean Restaurant Chain, Takes the Leap into Public Markets

June 15, 2023: Cava, a popular Mediterranean restaurant chain, is about to become a publicly traded company. Other restaurant businesses closely observe this move as they consider whether to follow suit.

The past 18 months have seen a sluggish market for initial public offerings (IPOs) due to various concerns, such as the conflict in Ukraine, inflation, rising interest rates, and fears of a recession. Consequently, only some U.S. companies have taken the step of going public. Out of the 44 IPOs that have priced shares this year, only 20 were for U.S.-based companies.

Cava’s IPO has the potential to break this trend, as other restaurant chains wait to gauge its success before making their own decisions. If Cava’s IPO goes well, it could signal investors that there is interest in the restaurant industry and that companies can achieve favorable valuations in the public markets.

On the eve of its IPO, Cava priced its shares at $22 each, valuing the company at $2.5 billion. Initially, the company aimed for a lower price range, but strong demand led to an increase. The stock will trade under the CAVA ticker on the New York Stock Exchange.

Matt Kennedy, a senior strategist at Renaissance Capital, believes that Cava’s decision to raise its price range early indicates positive IPO performance. This is encouraging news for other restaurant companies considering going public, such as Fogo de Chão, a Brazilian steakhouse, and Gen Restaurant Group, a Korean barbecue chain, who have confidentially filed regulatory paperwork. Panera Bread and Fat Brands’ Twin Peaks have also expressed their intention to issue an IPO soon.

Kennedy explains that companies in the same sector often go public in groups because no one wants to be the first. However, the window of opportunity for IPOs can close suddenly if market volatility increases, making both investors and private companies hesitant.

Even if the window remains open for restaurant IPOs, other companies may attract a different level of investor interest than Cava. Cava reported impressive same-store sales growth of 28% in the first quarter, despite being unprofitable. It is narrowing its losses and appears to be on track to report more net income than its rival, Sweetgreen, which went public in November 2021.

Kevin McCarthy, managing director at Neuberger Berman, commends Cava’s decision to go public early, highlighting its reputation as a high-quality brand.