IPO Insanity

Just when you thought it was safe to go back into the market...

Along comes Cava (CAVA), with its first-day 99% pop to around $40. And it's a Mediterranean fast-casual restaurant chain, no less, which is another way of saying it has nothing to do with artificial intelligence ("AI") or tech, for that matter.

I'm pretty sure most people didn't have restaurants on their bingo cards to become the hottest IPO of the year so far.

Yet here we are...

"It's been 20 months since a sizable deal raised the range," as Renaissance Capital's Bill Smith put it in a weekly IPO note he writes. "CAVA's 99% pop was the biggest for a U.S. company since 2021, and the biggest for a restaurant IPO since Shake Shack in 2015."

One reason, he says, is that "IPO investors have been starved of quality growth names," and Cava?has plenty of fans in the investment community.

Or as veteran restaurant analyst Roger Lipton of Lipton Financial Services puts it...

The appeal, not necessarily in this order revolves around (1) the stores seem busy and well run and the menu is in tune with more healthful eating trends (2) store level economics, as described, are attractive, with a stated 35% cash on cash return in year two (3) Chairman, Ron Shaich, who built Panera, is very well respected by the investment community.

But there's a catch... (To read the rest of this for free please click here.)