Sweetgreen, Inc. (SG) lived up to its name – jumping to $52 at its opening trade, up 85.7 percent from its $28 IPO price in its debut Thursday afternoon on the New York Stock Exchange. The first trade occurred at $52 at 2 p.m. EST, MarketWatch reported. The salad restaurant chain’s stock climbed to $52.72, up 88.3 percent, shortly after 2 p.m. EST, and hit an intraday high of $56.20 – up 100.71 percent. Sweetgreen closed on Thursday at $49.50 – up 76.79 percent from its IPO price. Based on its first-day NYSE closing price, Sweetgreen has a valuation of about $5.29 billion. Opening-day volume was about 11.35 million shares. (Editor’s Note: This column was updated Friday with KinderCare’s statement that its IPO has been postponed.)
Sweetgreen priced its IPO on Wednesday night (Nov. 17, 2021) at $28 – $3 above the top of its $23-to-$25 range. At pricing, Sweetgreen slightly upsized its IPO by selling 13 million shares – up from 12.5 million in the prospectus. The IPO raised $364 million. Sweetgreen – regarded as “the deal of the week” – was one of just six traditional IPOs scheduled for pricing during the week of Nov. 15, 2021.
KinderCare Learning Companies, Inc. (KLC proposed) postponed its IPO, due to “regulatory delays,” the company said in a statement released early Friday morning. This news followed word on Thursday morning that the IPO had been priced, but the company was awaiting word from the SEC that the deal had been declared effective. By Thursday afternoon, the word was that the IPO’s trading debut had been delayed to Friday morning on the NYSE – pending the SEC’s “effective” declaration. In its statement on Friday, KinderCare said that its IPO had received “healthy interest from investors.”
Founded in 1969, KinderCare provides day care and educational services for children ranging in age from six weeks to 12. The Portland, Oregon-based company ran 1,490 early childhood education centers with capacity to serve more than 195,000 children and maintained contracts for more than 650 before- and after-school sites in 40 states and the District of Columbia as of Oct. 2, 2021.
Bankers expect to raise about $3 billion from 15 deals this week. Seven SPAC IPOs have been priced so far this week, including one SPAC deal – Seaport Global Acquisition II Corp. (SGIIU) – that was priced early Wednesday before the U.S. stock market opened. Two small-cap IPOs and four SPACs are on Thursday night’s pricing schedule. (For more information, please see the IPO Calendar.)
An Appetite for Sweetgreen
The word on the Street was that IPO investors were hungry for Sweetgreen’s IPO.
“People like the story,” an IPO pro says. “They’re into healthy food. They’re popular with Millennials and Gen Z. They focus on local farm to table. They’re conscious of their impact on the environment. And they give back to charity.”
Allocations were said to be extremely tight.
Sweetgreen reserved up to 1 percent of the shares in its IPO for its eligible customers to buy online through Robinhood.
Goldman Sachs, J.P. Morgan, Allen & Co., Morgan Stanley, Citigroup, Cowen, Oppenheimer & Co. and William Blair were the joint book-runners of the Sweetgreen IPO.
Fidelity, T. Rowe Price and Revolution Growth are among Sweetgreen’s biggest shareholders.
All Hail the Kale
Three friends started Sweetgreen by opening a 560-square-foot restaurant in 2007 near Georgetown University in Washington, D.C. The idea was to focus on salads and plant-based meals – a “plant-forward” menu – as an antidote to the meat-centric fast-food outlets near the campus. Sweetgreen’s founders built their menu around kale, chickpeas, avocados, tomatoes, quinoa and chicken, which are popular ingredients in their customizable salads and warm bowls. These young entrepreneurs, who were all college students, made a deliberate move away from the fast-food staples of burgers, fries, pizza and chicken wings.
Since then, Sweetgreen has grown to 140 restaurants in 13 states and Washington, D.C., as of Sept. 30, 2021.The Los Angeles-based company employs over 5,000 people.
“To date, we have told bold stories with some of the largest celebrities across food, music and sports, including Naomi Osaka, David Chang, and others,” the Sweetgreen prospectus says. “We are confident that these collaborations will continue to drive increased engagement with our community and put Sweetgreen in a rare class of culturally minded companies. In a 2020 Evercore survey, we also ranked in the top three of 15 favorite quick-service restaurant chains among ages 18-29, ahead of many popular brands.”
Shades of Green and Red
IPO investors like Sweetgreen’s revenue growth. The salad chain’s revenue grew to $274.15 million at Dec. 29, 2019, from just $42.11 million at Dec.28, 2014.
The COVID-19 pandemic hurt Sweetgreen – just as it did thousands of restaurants across the country. The pandemic lockdown restrictions forced Sweetgreen to close restaurants during the second and third quarters of its fiscal 2020, cutting its revenue to $220.62 million at Dec. 27. 2020 – a drop of 19.5 percent from year-end 2019.
Sweetgreen stepped up its delivery and takeout game during the pandemic. For the 12 months ended Sept. 26, 2021, Sweetgreen reported revenue of $302.63 million – a jump of 37.2 percent from year-end 2020.
That revenue growth has not translated into profit – yet. Sweetgreen posted a net loss of $128.06 million for the 12 months that ended Sept. 26, 2021 – a decline of about 10.3 percent from its net loss at year-end 2020.
Sweetgreen has incurred “significant net losses since inception,” the prospectus says.
The lack of profitability does not make Sweetgreen unusual among companies that have gone public recently. But Fortune magazine’s Jessica Mathews called out Sweetgreen CEO Jonathan Neman for telling reporters – including Kara Swisher, the co-founder of Recode – that Sweetgreen was profitable. The IPO’s prospectus shows that hasn’t been the case since at least December 2014, as she notes in her story, published online on Oct. 28, 2021.
Sweetgreen says it plans to open at least 30 company-owned restaurants in the U.S. in 2021. The company also says it intends to double its restaurant footprint in the next three to five years.
At some point, Wall Street will want to see that growth wash away the red ink and color Sweetgreen’s bottom line a sweet shade of, well, green.
A November Moonshot
Four IPOs were priced Tuesday night (Nov. 16, 2021). One deal – Sono Group N.V. (SEV) – blasted off into the moonshot zone on Wednesday (Nov. 17, 2021), its first day of trading. Let’s take a look at those four deals.
Sono Group N.V. (SEV), a German solar electric car maker, priced its IPO on Tuesday night at $15 – the mid-point of its $14-to-$16 price range – on 10 million shares. Berenberg and Craig-Hallum were the joint book-runners for Sono’s IPO. Sono’s stock jumped to $20.06 at the opening trade on Wednesday. Sono scored a moonshot on its first day of trading, ending at $38.20 – up a whopping 154.7 percent. (A moonshot occurs when a stock gains 100 percent or more in its first day of trading.)
Braze, Inc. (BRZE), a customer engagement software service, priced its IPO on Tuesday night (Nov. 16, 2021) at $65 – $5 above the top of its $55-to-$60 range – on just 8 million shares. Goldman Sachs, J.P. Morgan, Barclays, Piper Sandler and William Blair were the joint book-runners of the Braze IPO. Braze popped at the opening to trade at $87.20 on Wednesday on NASDAQ. By the closing bell, Braze shares were up 43.7 percent to end their first day of trading at $93.39.
Canadian Bitcoin miner Iris Energy (IREN) also priced its IPO on Tuesday night at $28 – $1 above the top of its $25-to-$27 range – on only 8.3 million shares. J.P. Morgan led the team of seven joint book-runners on this deal. Iris Energy’s stock opened flat – at $28 – and then slid below its issue price to become a broken deal. The stock closed Wednesday at $24.45, down 12.7 percent.
UserTesting, Inc. (USER), a San Francisco-based pioneer of a video platform for businesses to test customers’ reactions to products and services, rounded up Tuesday night’s roster of four IPOs. UserTesting’s IPO was cut drastically: The deal was priced at $14 – $1 below its $15-to-$17 price range – and the number of shares was reduced to 10 million, down from 14.17 million in the prospectus. Morgan Stanley and J.P. Morgan were the joint book-runners of UserTesting’s IPO. UserTesting started trading Wednesday at $15.25 on the New York Stock Exchange. But the stock gave up most of its gains to end Wednesday at $14.01, up just 1 penny from its IPO price.
Thanksgiving Week
The IPO Calendar is as bare as Old Mother Hubbard’s cupboard for the week of Nov. 22nd, when the Thanksgiving holiday falls on Thursday, Nov. 25th. But that situation could change as IPO filings continue to flow into the U.S. Securities and Exchange Commission’s filing window.
Stay tuned.
(For more information, please check the IPO Calendar and click on a company’s name, which will take you to the IPO Profile and a link to the prospectus.)
(Never trade on proposed symbols. You might wind up owning something on the OTC Bulletin Board.)
Disclosure: Nobody on the IPOScoop.com staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The IPOScoop.com staff does not issue advice, recommendations or opinions.
Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest.