Shake Shack founder Danny Meyer celebrates his company’s IPO on the floor of the New York Stock Exchange on Friday. Shares of the gourmet hamburger chain soared 150% in their first few minutes of trading on Friday.

Bloomberg/New York


After more than doubling in its trading debut, Shake Shack is being valued almost as highly as Facebook by at least one measure.
Shake Shack shares have a price-to-sales ratio of about 15.6, just shy of Facebook’s 16.1 and topping all but five companies in the Standard & Poor’s 500 Index. Vertex Pharmaceuticals  leads the index with a ratio of about 45.9.
The strong IPO is an indication of shifting attitudes toward fast food, particularly among younger diners, chief executive officer Randy Garutti said. Shake Shack’s debut comes two days after a CEO change at McDonald’s Corp, which is mired in its worst US sales slump in more than a decade.
“My kids will grow up in a generation of people who isn’t going to see fast food the way it’s been seen over the last few decades, and those people generally want to go to a place like Shake Shack,” Garutti said in an interview with Bloomberg Television’s Betty Liu. “We’ve helped define that, and we’re going to be out in front of that as we go.”
Shake Shack, founded by restaurateur Danny Meyer, had revenue of about $83.8mn this year in the 39 weeks through September 24. Another quarter of sales at that pace would give the company $111.7mn in revenue for the full year. The restaurant chain had a market value of about $1.74bn as of 2:54 p.m. in New York after the shares surged on the first day of trading. The company also has an enterprise-to-sales ratio of about 15.4, which would be in the top 20 in the S&P 500, according to data compiled by Bloomberg.
Shake Shack’s road to becoming a stock-market darling began modestly. It opened in 2001 as a hot-dog kiosk to help support the restoration of Manhattan’s Madison Square Park. The first official Shake Shack was born three years later, and it wasn’t until 2008 that the company started expanding. It now has 63 stores from Chicago to Dubai that sell burgers, fries and frozen custard.
Shares of the burger chain more than doubled to $48.91 in New York. Shake Shack, trading under the ticker SHAK, sold 5mn shares for $21 apiece as part of the IPO, according to a statement on Thursday, after offering them for $17 to $19 each.
Shake Shack plans to open 10 new company-operated stores each year in the US starting in 2015. Part of its proceeds will be used toward expansion and renovating existing stores. Shake Shack also plans to use the money to make a payment to Meyer and early backers such as Leonard Green & Partners LP, as well as to repay debt.
Meyer, 56, is credited with founding some of New York’s most prestigious eateries, including Gramercy Tavern, Eleven Madison Park, and Union Square Cafe, which he opened three decades ago. Born and raised in St. Louis, he serves as chairman of Shake Shack. His firm, Union Square Hospitality Group, also operates a catering business and hospitality-consulting services. The company is offering a dual-class share structure, with the Class A stock issued in the IPO representing 44.5% of the economic stake and 14.1% of voting power.
Current stockholders will own, through Class A stock, 55.5% of economic interest and 17.6% of voting. The Class B shares held by those investors will account for the remaining 68.3% of voting power. JPMorgan Chase & Co and Morgan Stanley managed the offering.
Shake Shack is profitable, though its global expansion has weighed on earnings. It posted $3.55mn in net income in the 39 weeks to September 24, down 20% from the same period of 2013.
Revenue jumped 41% in that time, boosted by consumers turning away from traditional fast food. “We really think that Shake Shack is at the beginning of a whole new category called fine casual,” he said in the Bloomberg TV interview. “We have a team of a people who can take the systems that fast casual knows and apply them to the choices and priorities that we’ve always made in fine dining.”