Cava Listing Heralds Potential IPO Market Rebound

Following a listing by restaurant group Cava, the American market is hungry for IPOs.

The fast casual restaurant chain went public via an initial public offering (IPO) last week, with its shares nearly doubling in its debut.

And as Bloomberg News reported Monday (June 26), three other companies are planning listings of their own this week, with $1.5 billion is expected to be raised in IPOs on U.S. exchanges overall this month.

This marks the first consecutive months with more than $1 billion sold since autumn of last year, the report said.

“Everyone was watching Cava very closely, so that’s going to be a good starting point for the opening up of the IPO market for new companies,” said Greg Martin, co-founder of Rainmaker Securities, which handles secondary transactions for private companies.

“There are a lot of great companies that are private that have filed. The bar will still be high, but there’s clearly a lot of pent-up demand.”

The news follows a report last week by Goldman Sachs which found that IPO activity was heating up, though still remaining below the typical macro environment for listings.

The bank’s analysts expect the IPO environment to continue improving in the second half of 2023, even exceeding its current barometer if the economy sees a soft landing.

The Bloomberg report notes that Cava’s success could prompt other fast-casual brands — Panera for example — to go after their own IPOs.

And as PYMNTS wrote last week, many publicly-traded fast-casual brands saw their stock prices dip following Cava’s listing.

“Notably, other kinds of restaurants’ stocks are not suffering the same impact, suggesting that investors are less worried about the competitive environment outside the fast-casual segment,” that report said, as quick-service restaurant (QSR) chains Starbucks, McDonald’s, Domino’s Pizza and Yum Brands all rose up since Cava’s announcement.

Cava, meanwhile, sees those brands as its competition.

“We face significant competition from national, regional and locally-owned restaurants, including limited service restaurants, particularly within the fast-casual dining and traditional fast-food categories, who offer in-restaurant, carry-out, delivery, and/or catering services,” the company stated in a Securities and Exchange Commission (SEC) filing last month.

Elsewhere in the IPO space, Oddity, a beauty and technology company that manages brands like Il Makiage and Spoiled Child, has submitted its own application to go public, PYMNTS reported Monday.

This move, the report said, is worth noting not only because of how scares IPOs are lately but “also because it aligns with the momentum surrounding artificial intelligence (AI),” which is at the “cornerstone of Oddity’s operations, as the company used data to craft brands and deliver personalized product recommendations to its customers.”