US restaurant chain tests appetite for IPO as Cava Pops debuts

Shares in US restaurant chain Cava nearly doubled on its New York debut on Thursday on hopes its success will help others bring it to market and end a capital-raising drought.

Cava’s pop made it the best opening-day performance by a US initial public offering of more than $300 million in nearly two years, according to data provider DeLogic.

The Mediterranean-style chain, which describes itself as bringing “the heart, health and humanity to food”, raised $318 million from its IPO, bringing the loss-making company’s market capitalization to $4.9 billion. .

Despite the aggressive pricing, Kava benefited. It initially raised the range in which it was offering its shares, then priced them at $22 a share, 10 percent above the top end of that new range.

The company’s shares soared 99 percent to $43.78 on Thursday.

While the benchmark S&P 500 has gained 15 percent this year, market sentiment has been less reassuring as investors worry about recession risks and the rally’s reliance on a handful of giant technology companies, including Nvidia, Microsoft and Amazon. are worried.

On Wednesday, hours before Cava was to price its deal, the Federal Reserve held interest rates steady for the first time in 15 months after a campaign that saw official borrowing costs reduced from near zero to between 5 percent and 5.25 percent. pushed to the limit.

According to Dealogic, IPOs have raised $8 billion in the US this year. It is getting close to the $8.6bn raised in the whole of 2022 – a year in which the US market fell sharply – but a far cry from the $154bn achieved in the 2021 boom.

Bankers cautioned against expecting a rush of deals.

“I expect a gradual reopening of the markets, not a floodgates opening,” said Brittany Collier, head of consumer and retail equity capital markets at JP Morgan. “Although there is clearly a demand for higher quality companies.”

JPMorgan, along with Jefferies, led the deal, but Collier declined to comment on the transaction.

The IPO drought is not only a US problem. Globally, companies have raised $56bn, down almost a quarter from last year’s level and 70 per cent less than the 2021 boom.

We Soda, the maker of soda ash in London, on Wednesday scrapped plans to sell up to 1 billion pounds of shares after investors balked at the price desired by the company. The UK capital’s biggest float was expected this year.