Shake Shack Said to Aim for $1 Billion IPO Valuation

Shake Shack
People sit outside Shake Shack in Madison Square Park in New York on Aug. 18, 2014. Photographer: Andrew Burton/Getty Images

Shake Shack, the burger chain started by restauranteur Danny Meyer as a kiosk in a New York City park, is preparing for an initial public offering that could value it as high as $1 billion, people familiar with the matter said.

At that level, Shake Shack would debut at 50 times projected earnings of about $20 million this year, the people said, asking not to be named because the details are private. The company has tapped JPMorgan Chase & Co. and Morgan Stanley to manage the share sale, said the people.

That valuation would put it in line with other dining chains that have tapped into investor appetite for new stocks in recent years. El Pollo Loco Holdings Inc., which raised $123 million in July, now trades at about 60 times projected 2014 earnings, while Potbelly Corp. trades at over 64 times estimated earnings, data compiled by Bloomberg show.

The new restaurants have proven volatile as investments. Potbelly, which more than doubled on its debut last year, now trades below its IPO price. Noodles & Co., which also doubled on its first day of trading has since given back all of those gains after it missed some quarterly revenue and earnings estimates.

Shake Shack, JPMorgan and Morgan Stanley declined to comment on any IPO plans. Reuters reported last month that Shake Shack had tapped the banks for an IPO that could come as soon as this year.

Shake Shack, which opened in New York’s Madison Square Park in 2004, has more than 50 locations worldwide -- including in London, Dubai and Moscow. Its U.S. sales were about $62.3 million last year, restaurant researcher Technomic Inc. estimates.

The company is famous for its “ShackBurger,” which is made with a special sauce, and its signature frozen-custard milkshakes. It is owned by Union Square Hospitality Group, which also owns Gramercy Tavern and Blue Smoke, and where Meyer is chief executive officer. Union Square Hospitality Group is backed by private-equity firm Leonard Green & Partners LP.

A representative for Leonard Green didn’t immediately reply to messages seeking commment.

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