Shake Shack, the hipster-ish burger chain that began as a hot dog stand in Madison Square Park a decade ago, was valued at nearly US$2 billion when it floated on the New York Stock Exchange on Friday.
Shares in the company soared by more than 150 percent to US$52.50 before easing back to US$48 — still more than double the US$21 offer price.
At the high, founder Danny Meyer’s 31 percent stake was worth nearly US$400 million. Meyer, 56, an established New York City restaurateur, owns popular establishments Blue Smoke, Gramercy Tavern and Union Square Cafe.
Photo: Reuters
“We didn’t have any dreams that today would ever come,” he told CNBC from the floor of the stock exchange. “We wanted to open a hot dog cart to help … Madison Square Park. And when you put a great product together with amazing people with the kind of heart that you have felt here on the floor, these people are doing it, and it’s our staff that this day is for.”
The company, which now operates 63 outlets in nine countries, had already increased its initial public offering (IPO) price range from US$14 to US$16 per share to between US$17 and US$19.
The company tweeted that it would celebrate the IPO success by giving out free burgers outside “the New York SHACK Exchange.”
It is also “spreading some Shack love” throughout New York City, with an open-top Shake bus touring Manhattan.
Shake Shack might sound like an unusual name for a burger joint, but it is catchier than the other options Meyer was tossing around when he first set up shop in 2001.
“We entertained a bunch of names for the kiosk (most of them pretty bad — like Custard’s First Stand, Dog Run and Madison Mixer) and ultimately settled on Shake Shack,” he said in a letter to prospective shareholders.
The company, which has opened across the Middle East, Russia, Turkey and in a prime location in London’s Covent Garden, is growing sales fast. Revenue in the first nine months of last year rose by 41 percent to US$84 million. With the funding from the IPO, Meyer hopes to open 10 new company-owned stores a year, with a target of 450 in the long term.
Shake Shack’s good fortune comes at the expense of McDonald’s, which last week reported its worst results in a decade and axed its chief executive.
The departure of Don Thompson, McDonald’s first African American chief executive, was announced on Wednesday night. He will be replaced by Briton Steve Easterbrook, the company’s chief brand officer and the former boss of McDonald’s in the UK and northern Europe.
Thompson was axed under pressure from investors. Last week, McDonald’s reported a 15 percent fall in annual profits to US$4.7 billion.
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