Today’s News
Shares of the Australian Mexican restaurant chain, Guzman Y Gomez (GYG.AX), soared by more than one-third on their trading debut, marking the country’s largest IPO in a year.
The Sydney-based startup’s shares opened at AUD 29.90 (USD 19.95), a 36% increase over the AUD 22 (USD 14.67) initial price, amidst an otherwise flat market. In the first ten minutes alone, over 60 million of the 100 million shares offered were traded.
Image Source: Guzman Y Gomez
The successful IPO raised AUD 335.1 million (USD 224 million), representing about one-sixth of the company, and boosted Guzman Y Gomez’s market capitalization from AUD 2.2 billion (USD 1.46 B) to approximately AUD 3 billion (USD 2 B). Despite forecasting a net loss for 2024, the company anticipates a profit in 2025 and aims to match McDonald’s current Australian store count within 20 years.
The IPO, primarily targeted at existing financiers and franchise owners, reflects positive investor sentiment despite the challenging economic conditions marked by high interest rates and inflation which had dampened demand in 2022 and 2023. After a record number of listings in 2021, IPO activity in Australia dropped significantly, with only AUD 98 million (USD 65 M) raised in the first half of 2024, one of the lowest figures in over a decade.
Image Source: The Sydney Morning Herald
Image Source: Financial Review
Campbell Welch, an adviser at Novus Capital, commented on the IPO’s success, stating, “It proves the adage that you can list a good company even in a bad market.” He also noted the company’s high valuation, implying that many factors would need to align to justify it. The company plans to aggressively expand, opening at least 30 stores annually, a pace it has only achieved once before, in 2023.
GYG’s financial practices, such as excluding lease liabilities and share-based payments from earnings projections, are typical for franchise businesses, according to the company.
Co-CEO Steven Marks emphasized their focus post-listing, “Once we’re listed, the market will price us every day and our focus will be on the things we can control: selling burritos and delivering on our strategy.”
Although the company was not available for further comments, a Morningstar analysis previously suggested the stock was overvalued at AUD 15 (USD 10), questioning the rapid expansion given GYG’s small market share.
($1 = 1.4990 Australian dollars)
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