Shares in US restaurant chain Cava nearly doubled on its New York debut on Thursday, raising hopes its success would spur others to follow it in the market and end a drought to raise capital.
Cava’s pop put it on track for the best opening day performance by a US IPO of more than $300 million in nearly two years, according to data provider Dealogic.
The Mediterranean-style chain, which describes itself as “bringing heart, health and humanity to food,” raised $318 million in its IPO, bringing the loss-making company’s market capitalization to $2.2 billion.
Cava’s gains came despite aggressive pricing. It initially increased the range in which it offered its stock, then priced them 10 percent above the top end of that new range at $22 per share.
By mid-afternoon, shares were trading nearly 93 percent higher to $42.38, but were up more than 112 percent.
While the S&P 500 benchmark is up 15 percent this year, market sentiment is less reassuring as investors worry about the risk of a recession and worry about the rally’s reliance on a handful of giant tech companies, including Nvidia, Microsoft and Amazon.
On Wednesday, hours before Cava unveiled his deal, the Federal Reserve held interest rates stable for the first time in 15 months after a campaign that pushed official borrowing costs from near zero to a range of 5 percent to 5.25 percent.
According to Dealogic, IPOs have raised $8 billion in the US this year. That’s close to the $8.6 billion raised in all of 2022 — a year in which U.S. markets fell heavily — but is a far cry from the $154 billion raised during the 2021 boom.
Bankers warned of a rush of deals.
“I continue to expect a gradual reopening of the market, not an opening of the floodgates,” said Brittany Collier, head of capital markets for consumer and retail equities at JPMorgan. “However, there is clearly a demand for high-quality companies.”
JPMorgan co-led the deal with Jefferies, but Collier declined to comment on the transaction itself.
The IPO drought is not just a US problem. Globally, businesses raised $56 billion, nearly a quarter lower than this time last year and 70 percent lower than during the 2021 boom.
On Wednesday WE Soda, the London soda ash producer, withdrew plans to sell shares worth up to £1bn after investors objected to the price the company wanted. It was expected to be the largest float in the British capital this year.