Cava, a Mediterranean restaurant chain, witnessed a 117% surge in its shares during its market debut on Thursday, making it the highest-performing IPO this year for companies valued over $500 million. The company’s stock opened at $42 per share and closed at $43.78 per share, giving it a market value of $4.88 billion. Cava Group priced its IPO at $22 per share, which was higher than the expected range of $19 to $20. The company sold 14.4 million shares, raising approximately $318 million, and initially valued the restaurant chain at around $2.45 billion. The stock now trades on the New York Stock Exchange under the ticker symbol “CAVA.”
Cava’s business expansion and financial performance
Although Cava was founded in 2006, it opened its first fast-casual location in 2011, following a similar formula to Chipotle Mexican Grill. Cava introduced some eaters to ingredients like harissa and tahini, positioning itself as a healthy and convenient option. The company also sells its dips, spreads, and salad dressings in grocery stores. In 2018, Cava acquired Zoes Kitchen, a rival Mediterranean chain, for $300 million, and converted Zoes Kitchen locations into Cava restaurants, contributing to its footprint of 263 locations as of April 16.
Last year, Cava’s net sales increased by 12.8% from the previous year to $564.1 million, indicating an inflection point in the business, according to CEO Brett Schulman on CNBC’s “Squawk on the Street.” However, the company’s losses from 2021 to 2022 widened from $37.4 million to $59 million. In the first quarter of this year, Cava reported a net loss of $2.1 million, a narrower loss than the $20 million net loss in the same period last year. Industry experts suggest that Cava has demonstrated a clear path to profitability, making it more attractive to investors who are looking for growth stocks.
Cava intends to use the proceeds from its IPO to open new locations and for general corporate purposes. The company’s market debut adds to the growing number of publicly traded fast-casual chains, with sector leader Chipotle making its public market debut in 2006 and seeing its market value grow to $56.9 billion. In November 2021, salad chain Sweetgreen also went public and now has a market value of $1.2 billion, despite the company’s lack of profit, with shares increasing by over 25% this year.
Cava’s successful market debut is a promising sign for the company, which has shown a clear path to profitability despite its losses. Its expansion and acquisition of rival chains contribute to its growing footprint, making it a more attractive stock for investors. The company’s IPO is also a positive indication for the fast-casual chain sector, which has seen significant growth in recent years.
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