Mediterranean cafe chain Cava shares increased nearly 112% in demand debut

June 19, 2023: Shares of Mediterranean cafe chain Cava increased nearly 112% in its market debut before giving up some of those gains.

The stock opened at $42 per share, giving the business a market value of $4.68 billion. Shares spiked even higher in morning trading, then decreased to hover around the door-day price in the early afternoon. The stock trades at about $45 per share, up 105% from its initial public offering price.

Cava Group priced its IPO at $22 per share on Wednesday, above the anticipated range of $19 to $20. The company sold 14.4 million shares, growing nearly $318 million and initially valuing the restaurant chain at roughly $2.45 billion.

The stock trades on the New York Stock Exchange under the “CAVA.”

Although founded in 2006, Cava opened its first fast-casual location in 2011, modeling its build-your-own Mediterranean meals after the formula made famous by Chipotle Mexican Grill. The chain built a customer base by introducing some eaters to ingredients such as harissa and tahini, positioning itself as a healthy and convenient option. The company also sells its dips, spreads, and salad dressings in grocery stores.

Cava acquired Zoes Kitchen in 2018, taking the rival Mediterranean chain private for $300 million. It’s spent the last five years converting Zoes Kitchen locations into Cava restaurants, contributing to its footprint of 263 locations as of April 16.

Last year, Cava’s net sales climbed to $564.1 million, 12.8% higher than earlier.

“You’re seeing the inflection point in the business, and all of that robust structure we’ve invested in, the restaurant growth, starting to take hold and drive tailwinds to the business,” CEO Brett Schulman said.

But its losses also widened from $37.4 million in 2021 to $59 million in 2022. Still, industry experts say that the chain has demonstrated a clear path to profitability, making it more attractive for investors looking for growth stocks. In the first quarter, it stated a net loss of $2.1 million, narrower than its $20 million net loss in the year-ago period.

The restaurant company plans to use the proceeds from its IPO for new location openings and general corporate purposes.

Cava adds to the growing number of publicly traded fast-casual chains. Sector leader Chipotle made its public market debut in 2006 and has seen its market value grow to $56.9 billion.