The Bojangles’ Inc. (Nasdaq: BOJA) IPO is here. BOJA stock started trading today, May 8.
The Bojangles’ stock price was originally supposed to range from $15 to $17. On Wednesday, the company increased the price range to $18 to $19 a share.
Because the Bojangles’ IPO is the second restaurant IPO of 2015 behind Shake Shack Inc. (NYSE: SHAK), we’ve answered the biggest questions that investors have now.
Here’s everything you want to know about BOJA stock’s debut - and whether or not it’s a buy…
Last night, the Bojangles’ IPO price was set at $19, the high end of the upwardly revised range. At 2:15 p.m., the Bojangles’ stock price was around $25 a share – 31% higher than its IPO price.
Bojangles’ sold 7.8 million shares. The company raised $143 million in its IPO.
On Wednesday, Bojangles’ raised its deal size by 43%. It originally planned to raise $100 million by offering 6.3 million shares at a range of $15 to $17.
Stock Debut Date: May 8
Ticker: (Nasdaq: BOJA)
IPO Price: $19
Shares Sold: 7.8 million
IPO Total: $143 million
Opening Price: $26.60
After the IPO, Bojangles’ sits on a market valuation of $750 million. That’s tiny compared to Shake Shack’s $2.3 billion valuation and Habit Restaurants Inc.’s (Nasdaq: HABT) $946 million valuation, the last two restaurants to go public.
Founded in 1977 and based in North Carolina, Bojangles’ is a southeastern restaurant chain with 622 locations across 10 states and Washington, D.C. The company is known for its fried chicken, all-day breakfast, and made-from-scratch biscuits.
Bojangles’ deep-fried menu items don’t offer much for health-conscious customers. The company acknowledges that competition from other restaurants could affect profits.
“We expect competition in this market and each of our other markets to continue to be intense because consumer trends are favoring limited service restaurants that offer healthier menu items,” the IPO filing stated. “If our company-operated and franchised restaurants cannot compete successfully with other quick-service and fast-casual restaurants in new and existing markets, we could lose customers and our revenues could decline.”
Bojangles’ sales and revenue numbers have been consistently strong. Last year, company restaurants raked in $407 million in revenue while franchise stores made $629 million.
Bojangles’ hit a milestone in its 37-year history when it reached $1 billion in annual system-wide revenue last October. The company’s total net income was $26.1 million in 2014. Same store sales grew 7% in Q4 2014.
One of the company’s most lucrative strategies is the all-day breakfast menu. Bojangles’ breakfast made up 38% of the company’s revenue.
“Our strong breakfast results make us a leader in the fastest-growing daypart in the industry,” the company’s filing states. “We believe breakfast has broad customer appeal and is the most habitual daypart, which drives repeat business and customer loyalty.”
The joint underwriters for the deal are Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC), Jefferies Group, Barclays Plc. (NYSE ADR: BCS), Goldman Sachs Group Inc. (NYSE: GS), Piper Jaffray Companies (NYSE: PJC), William Blair, KeyBanc Capital Markets, and RBC Capital Markets.
Fast-casual burger chain Shake Shack was the first restaurant IPO of the year. The company reported $156.1 million in sales for the first nine months of 2014. Total revenue – which only includes licensing revenue from franchised locations – reached $83.8 million during the first three quarters of last year.
Shake Shack’s biggest concern is growth potential. New restaurants opened within the last three years have a 79% annual revenue growth. But total revenue had a compound annual growth rate of only 62%. That means sales growth has been generated almost entirely through new locations. Same-store sales have also slowed, dropping to 5.9% growth in 2013 from 7.1% in 2012.
The Shake Shack IPO soared in its debut. SHAK stock skyrocketed 119% in first-day trading. Shares currently trade near $64. That’s 214% above the pre-IPO stock price of $21 and 237% above the Bojangles’ stock price of $19.
Now for the big question…
Investing in IPOs is very difficult for regular investors.
That’s because they’re usually reserved for customers with the deepest pockets. Most pre-IPO shares go to institutional investors or hedge fund managers who can buy huge quantities of a stock at once. By the time we could buy into it, the stock will be selling off.
Additionally, the IPOs that regular traders want are often accompanied by tons of pre-deal hype. And sometimes that excitement overshadows the reality that it’s a potentially dangerous stock.
"Too many investors hear of a 'hot IPO' and try to get in on the action – without doing any homework at all," Money Morning's Defense & Tech Specialist Michael A. Robinson said. "That's a recipe for a hefty loss."
Even though they’re trading more than 30% above the Bojangles’ IPO price, BOJA shares should be avoided…
According to the IPO filing, the company isn’t confident in its growth strategy. That means Bojangles’ following could stay limited to the southeast where most stores are concentrated.
“New restaurants, once opened, may not be profitable or may close, and the increases in average restaurant revenues and comparable restaurant sales that we have experienced in the past may not be indicative of future results,” the filing explained.
Additionally, Bojangles’ closest peers indicate a diminishing interest in chicken. Shares of El Pollo Loco Holdings Inc. (Nasdaq: LOCO), a southwestern chain specializing in Mexican grilled chicken, have slumped 26.9% in the last six months. Popeyes Louisiana Kitchen Inc. (Nasdaq: PLKI) has tumbled 2.4% since April 7.
What are your thoughts on the Bojangles’ IPO or the Bojangles’ stock price? Talk to us on Twitter at @AlexMcGuire92 and @moneymorning.
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