The initial public offering (IPO) market isn’t dead after all. One of the hottest new IPOs to hit the market has done so today, with Cava (NYSE:CAVA) officially starting trading. At the time of this writing, CAVA stock is up more than 90% on its first day, a strong opening to be sure.
In earlier trading, CAVA stock actually more than doubled as investor enthusiasm around the Mediterranean restaurant chain remains very high. Initially listed at $22 per share, CAVA stock actually hit an intraday high of $46.75 before giving up some of those gains. Notably, at its high, it actually broke through the $5 billion valuation mark, after being valued at roughly $2.45 billion at its initial offering price.
Additionally, this listing will provide the company with approximately $318 million in capital to expand its restaurant empire. With 263 restaurants under its belt, the company intends to see its footprint grow materially. This IPO certainly indicates that future offerings could be in the cards, given the immense investor interest shown on CAVA’s first day of trading.
Let’s dive more into what investors should be watching with this highly touted IPO.
CAVA Stock Soars on First Day of Trading
Demand for fresh-made casual dining appears to remain red-hot. As many experts have noted, the success of Cava’s IPO may have been expected, considering the long-term success that similar high-growth food chains like Chipotle (NYSE:CMG) have had in recent years. For investors looking to gain exposure to fast-growing chains before they take off, taking part in an IPO is a great way to do so.
Of course, on any company’s first day of trading, a significant amount of price discovery is likely to take place. Thus, many long-term investors may want to wait for the dust to settle before building a position. It’s clear that the market believes a $2.5 billion valuation for this company isn’t adequate. But what investors ultimately agree this company should be worth will likely change drastically in the coming days. Thus, I’m keeping CAVA stock on the watch list for now.
That said, this business has a scalable model and examples of success have also preceded it. So, today’s move certainly makes sense. CAVA is worth keeping an eye on from here.
On the date of publication, Chris MacDonald did not hold (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.
