Following its outsized initial public offering, Sweetgreen (NYSE:SG) stock is looking bittersweet. Despite a predicted range of $23-$25, the salad-slinger opened at $28 per share, earning it a nearly $3 billion valuation.
So what do you need to know?
The Los Angeles-based brand is one of many quick-service restaurants that could have thrived during the Covid-19 pandemic. Year over year however, Sweetgreen reported declining revenue of roughly 20% as fewer people opted to order online for quarantine-friendly pick up. Roughly 68% of its revenue comes from online orders, compared to 32% from walk-in sales. As such, investors are split on the salad operator.
Sweetgreen’s restrictive supply-chain model limits its growth compared to fast-casual giants Chipotle (NYSE:CMG) or Shake Shack (NYSE:SHAK). Instead of vertically integrating, it works to source its food locally. Partially as a result, its losses widened from $67 million to $139 million in 2020, even as many major restaurants profited. This only adds to the fact that Sweetgreen has yet to see a profitable quarter. For bears, this is a key argument on the company, and may prevent Sweetgreen stock from gaining.
SG will open for open trading later today, but before that, what do you need to know?
Sweetgreen Stock IPO: What to Know Ahead of Trading
- Firstly, Sweetgreen will be trading under the SG ticker when it opens this afternoon on the New York Stock Exchange.
- On Wednesday, Sweetgreen increased the size of its IPO from between $23-$25 to $28. It also increased from a 12.5 million share offering to 13 million.
- Class A shares grant investors one vote per share, meaning almost all decision making will be conducted by the Class B shareholders, who get 10 votes per share.
- At $28 per share, the health-conscious brand is priced to compete with the likes of Chipotle in terms of expected growth.
- Work-from-home trends are detrimental to Sweetgreen’s sales. Pre-pandemic, Sweetgreen was a popular office choice and had more than 1,000 drop-off points across numerous workplaces. With the pandemic quieting, it’s unclear the degree to which Sweetgreen will see a return to its previous numbers. Currently, 35% of its pre-pandemic “Outposts” are open.
- Many consider Sweetgreen to be comparable to a tech stock in terms of its growth model and commitment to digital innovation.
- Sweetgreen opened its first restaurant in 2007 in Washington, D.C. It began as a group of Georgetown students looking for a healthier alternative than the standard campus fare. Many of those founding students remain the primary owners of the company.
On the date of publication, Shrey Dua did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
