Recent trends in the IPO market indicate that restaurant chains are developing a penchant for going public, looking to rejuvenate their businesses at a time when the market is witnessing uncertainty. Salad chain Sweetgreen, Inc. is the latest to join the IPO aspirants in the food industry. The market will be closely following the event, given the mixed responses to recent food listings.
12.5 Mln Shares
The company this week set the terms for its upcoming initial public offering, aiming to raise around $300 million. It plans to offer 12.5 million shares at an estimated price in the range of $23 to $25 per share.
Read management/analysts’ comments on quarterly reports
The Culver City-based operator of fast-casual salad restaurants will list on the New York Stock Exchange under the symbol SG. The group of book-runners includes Goldman Sachs & Co., JP Morgan, Morgan Stanley, and Citigroup. The IPO is expected to take place next week. The proceeds from the offering will be used mainly for the development of technology acquired pursuant to the recent acquisition of Spyce Food Company and other general corporate purposes.
Digital Power
Currently, a major share of Sweetgreen’s sales is generated through digital channels, which have expanded steadily in recent years, enabling it to have the right kind of menus by understanding customer preferences. In fiscal 2020, the company generated revenues of $220.6 million, down 20% from the prior year. As a result, net loss widened to $141.2 million or $8.80 per share from $67.9 million or $4.50 per share in 2019.
Sweetgreen’s stakeholders would be looking for an effective turnaround strategy, considering the unimpressive bottom-line performance over the past several years, though the company came out with relatively better numbers in the most recent quarter.
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The other food chains that went public earlier this year include Krispy Kreme — the donut/coffee chain that returned to the public market in July after staying private for about five years — and Dutch Bros. Coffee, which made a successful market debut in mid-September. However, not every food listing was impressive, rather some of them fared poorly.
In Growth Mode
Founded in 2007, Sweetgreen opened its first restaurant in the same year. Currently, it owns and operates 140 restaurants in 13 states and Washington DC, supported by an effective end-to-end supply chain that begins with more than 200 domestic food partners including farmers and bakers. The management plans to double the restaurant footprint in the next few years, to position the business to meet the goal of transforming into a leading global restaurant and lifestyle brand.