IPO Of The Week: The Habit Restaurants

On Thursday, Nasdaq welcomed The Habit Restaurants, Inc. (HABT) to its ranks:

Nasdaq (NDAQ) announced that trading of The Habit Restaurants, Inc. (HABT) commenced on The Nasdaq Stock Market on November 20, 2014.

The Habit Restaurants, Inc., operator of The Habit Burger Grill, is a burger-centric fast casual restaurant concept that specializes in preparing fresh, made-to-order char-grilled burgers, sandwiches and salads. Fresh ingredients include USDA choice tri-tip steak, grilled chicken and line-caught sushi-grade albacore tuna cooked over an open flame. The first Habit opened in Santa Barbara, California in 1969, and has since grown to over 100 restaurants in 10 markets throughout California, Arizona, Utah and New Jersey.

"Since its first restaurant opening 45 years ago, The Habit continues to excel in the fast casual dining sector through its commitment to hospitality, quality and fresh, delicious ingredients," said Nelson Griggs, Executive Vice President, Listing Services, Nasdaq. "We congratulate The Habit Restaurants on its successful listing and we look forward to celebrating more milestones with them in the years to come."

The markets welcome HABT too, opening at $30 and spiking at one point as high as $41.99. Some commentary on the price action:

WSJ: Habit Restaurants Doubles In First Hours of Trading

According to IBD,

The Habit's public offering is expected to close Nov. 25. The company has given underwriters a 30-day option to purchase up to 750,000 more shares of common stock at the IPO price.

While most early analysts focused on the sizzle, Chris Nichols at Yahoo Finance focused on the beef:

For every fast-casual restaurant that goes public, it's customary for the media to ask if it's "the next Chipotle." Regardless of whether it is or isn't -- and we can't know that for years -- we thought it wouldn't be surprising to see Habit's shares climb potentially to the mid-$20s soon after trading began. That was based on the valuations of seven other fast-casual operators now on the market, where earnings multiples (setting aside some of the more outlandish price-to-earnings ratios) generally average in the high 30s. But we also believed that guess might be conservative given the market's demand for growth stocks, and it turned out to be.

First-day "pop"

For all practical purposes, everyday investors have no chance to get any stock at an initial pricing (unless it declines, of course). Outside of a few investors who are able to, the pricing essentially serves only as a talking point from which to hype the first-day "pop." The realistic price where most individuals can start buying is higher, sometimes much higher. In the case of Habit, it was $12 a share, or 67%, above the pricing.

However, now the story will start to be about Habit the business, not Habit the IPO. Data from food industry research firm Technomic says that U.S. burger sellers had sales of $72 billion last year, about $2.4 billion, or 3.3%, of that occurring at better burger stores like Habit. Food trends being what they are, Habit is happy to promise a great deal of growth.

Sales indeed are soaring. Through the first nine months of this year, revenue was $126.3 million, an amount already above the sales of $120.4 million for the entire 12 months of 2013. Although that reflects the effect of additional stores that have opened, same-store sales are consistently positive, as well. It also doesn't hurt the brand that a reader survey in Consumer Reports named The Habit Burger Grill as having the best-tasting burger in America.

Among the potential caveats Nichols notes are the rising cost of beef, rising labor costs, and the need for diversifying its market outside its California core.

On Friday, the stock price began seeking its level, at noon down 7.5% to a still-robust $36.58.

Disclosure: None.

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Firozali A Mulla1 9 years ago Member's comment


The people in the country illegally will know shortly that this stunt does not help them and may in fact hurt them –badly.

Section 2 of Obama's Executive Action is titled in bold font, You Cannot Apply For Several Months.

At that point, though, Obama will promise that they can eventually get relief from any deportation action and get authorization to work legally in the US. That may be tricky, since the actual law on green cards requires actual legal status.

The article is chock full of goodies, folks!

Joel Santiago 9 years ago Member's comment

What are you talking about? I think you commented on the wrong article by accident.

Firozali A Mulla1 9 years ago Member's comment

The promotion of family reunification was codified in the 1952 Immigration and Nationality Act, and the 480,000-plus family-based visas eat up most of the 675,000 immigrant visas that the U.S. grants each year. In today’s global competition for talent and innovation, that’s a blueprint for mediocrity. And changing it isn’t as heartless as it sounds. In 1952, it cost a lot of money to hop on a (propeller) plane to visit your relatives; you couldn’t dial them up on Skype for pennies a minute; you couldn’t read the same local papers or watch the same programs or enjoy the same music as relatives in your native place, much less send them parcels or money as cheaply as you can now. It’s a lot easier to stay in touch, even in effect to live in two countries at once.

Firozali A Mulla1 9 years ago Member's comment

With his executive order potentially shielding as many as 5 million undocumented immigrants from the threat of deportation for up to three years, President Barack Obama took a welcome step toward dealing with what my colleague Frank Wilkinson calls "The Fact" -- the entrenched presence of an estimated 11 million undocumented souls in the U.S. That’s cold comfort, though, to the 4.3 million would-be Americans hoping to legally join their U.S. citizen or green-card holding relatives on the basis of family ties. They’ve been waiting, in some cases for decades, for their numbers to be called. They found no joy in Obama’s speech. And after hearing it, they could be forgiven for concluding that breaking the law is more likely to pay off than observing it. If Obama and the U.S. Congress wanted to help them and the country, they could let them all in -- and then blow up the existing framework of family preferences and replace it with a points system similar to what exists in New Zealand and Canada.

Stock Sanity 9 years ago Member's comment

I've been waiting for this stock to IPO!