Cava’s shares opened trading Thursday at $42 and rose as much as 113%. The shares were up 88% to $41.30 at 12:55 p.m. in New York trading, giving the company a market value of $4.6 billion. The company sold more than 14 million shares for $22 each Wednesday after marketing them for $19 to $20, a range it had elevated earlier.

The Mediterranean eatery’s IPO, one of the few bright spots in a dismal year for listings on US exchanges, is the sixth-largest of 2023, not including so-called greenshoe shares, according to data compiled by Bloomberg. 

“The market’s always welcoming and ready for long-term sustainable growth stories, especially ones that are category defining brand,” Cava Chief Executive Officer Brett Schulman said in an interview. “That’s what we’re trying to do in the Mediterranean cultural cuisine category that we’ve established a clear dominant leadership position in.”

First-Day Pop

By one measure, the company’s opening pop of 91% marked the best debut since July 2021 for a firm listing on a US exchange that raised more than $100 million, data compiled by Bloomberg show.

Cava’s strong pricing and debut came even as its initial valuation drew skepticism from analysts including Bloomberg Intelligence’s Michael Halen and New Constructs Chief Executive Officer David Trainer. Both said the company’s valuation on some metrics was far higher than peers such as Chipotle Mexican Grill Inc., highlighting lagging restaurant-level margins. Analysts have compared Cava to restaurant companies such as Portillo’s Inc. and Sweetgreen Inc., both of which saw initial pops in their trading debuts before slumping over time.

‘Very Young’

“We’re very pleased with our restaurant-level margins,” Schulman said. “We’ve been able to continue to grow them over the years and we’re very young in our journey compared to a Chipotle, and we want to continue to reinvest in our team and reinvest in sustainable growth.”

Johnson & Johnson consumer health spinoff Kenvue Inc. scored the largest US listing this year with its $4.37 billion IPO on May 3. Kenvue alone has accounted for more than $4 out of every $10 raised on US exchanges in what is on pace to be the slowest year since at least 2009.

Cava’s strong debut is another signal that the IPO window is creaking open after being virtually shut for more than a year. Given the IPO priced above a range that was already boosted, Cava’s debut is a signal that companies including Fogo de Chao Inc., Fat Brands Inc.’s Twin Peaks sports bar business, and Panera Bread Co. may follow through on intentions to go public, industry watchers agree.

Sentiment Upswing

“The strong pricing for the deal indicates the improved sentiment for higher-quality US domiciled specialty IPOs,” said Josef Schuster, founder and chief executive officer of IPOX Schuster. “The combined online and offline strategy in a fast-growing niche industry has increased the attractiveness of the deal.”

Cava’s revenue has climbed while its losses have shrunk year over year. For the 16-week period ended April 16, it had a net loss of $2.1 million on revenue of $203 million, compared with a loss of $20 million on revenue of $159 million during that period last year, according its filings with the US Securities and Exchange Commission.

Washington-based Cava said it now has 263 restaurants, compared with 22 in 2016. The company plans to use the proceeds from the IPO to open more restaurants and sees the potential for more than 1,000 within the next decade.

The offering was led by JPMorgan Chase & Co., Jefferies Financial Group Inc. and Citigroup Inc. The company’s shares are trading on the the New York Stock Exchange under the symbol CAVA.