It’s been so long since TechCrunch+ has had the pleasure of covering an IPO from S-1 to first-day trading that we’ve nearly forgotten how to do it. Shaking off the cobwebs, let’s talk about how Cava’s debut went on Thursday.
After setting an initial IPO price range of $17 to $19 per share, later raising the interval to between $19 and $20, Cava priced at $22 per share.
The fast-casual restaurant chain is not TechCrunch+’s usual topic fare, but as the company was heavily backed by private capital during its early life — including some venture capital dollars — and how starved we have been for any data on how public-market investors would react to new growth stories, well, we’ve paid attention.
So, too, were the public market types, it seems, as Cava shares opened today at $42 per share and are currently trading at $42.33, up more than 92% from the company’s IPO price.
The IPO was a win from a pricing perspective, with the company easily besting the price area we had tipped for it. It was a winner of a fundraising event as well, with the company selling 14.44 million shares for a gross haul of $317.8 million. That figure will rise when its banks execute their underwriter’s option in time.
Looking at the Cava debut you would be hard pressed to find any signs that public market investors are not chomping at the bit for new offerings from operating groups that have a good chunk of growth ahead of them. That’s a startup-friendly market, at least in theory.
TechCrunch+ spoke with Cava CEO and co-founder Brett Schulman after his company began to trade, asking why this was the right time to go public. He said that investors are always “welcoming to long-term sustainable growth” stories. Given the general trajectory of software companies and the perspective in recent years that the TAM for tech products is even bigger than previously anticipated, we can read a nice bullish indicator from the Cava IPO for tech startups that may want, or need, to go public.
On the pricing front, Schulman indicated that Cava could have priced a bit higher but wanted to go out at a number it felt comfortable that it could “deliver on.” Frankly given how uneven stocks have been in the last year, a little caution doesn’t seem unwarranted, even if the company’s first day pop was chonky.
The question before us is whether the Cava IPO — which we could describe as a venture-backed unicorn IPO or tech-unrelated restaurant debut and be right twice — will have any real sway on tech founders sitting on the sidelines, waiting for friendlier markets to sell into. Well, Cava went out in a time when markets are supposed to be closed and with a lower-margin product managed to lock in a post-listing valuation of more than $4 billion by our calculations.
If Cava can do it with what I am told is pretty solid Mediterranean food, surely software companies with higher gross margins and recurring top line can manage the same feat. Right?
The Cava IPO could have been a chilling event. If the company had priced poorly and traded worse, it could have glued the IPO window shut. Instead, it feels more like a breath of fresh air from a window that is more open than anyone anticipated.
Unicorns, what is you excuse now? Do you have any left?