CAVA is hoping to turn grain bowls into green.
The Washington, D.C.-based Mediterranean restaurant chain is testing the market for IPOs as it begins trading on the New York Stock Exchange today under the ticker CAVA. The company announced Wednesday evening it sold 14.4 million shares at the price of $22 per share, which raises about $318 million. The strong pricing is above its previously stated target of $19 to $20 per share, which was already increased from its prior target of $17 to $19. At $22 per share, the company is valued at about $2.45 billion based on its outstanding share count.
“We’ve seen great reception from the investor community,” said co-founder and CEO Brett Schulman in an interview with Fortune. “They see what we see, which is this significant whitespace opportunity to define a new category and a cultural cuisine that’s really growing rapidly every year.”
Investors and IPO prospects alike will be following closely to see if investors are ready to once again embrace unprofitable public companies. After bank failures, persistent inflation, and rocky public markets, even tech unicorns have continued to push off their entrance into the public markets. So far in 2023, there have been only 44 U.S. IPOs. In 2021, there were a total of 397.
Food chains have experienced sales and revenue growth as the public goes back to eating out after pandemic restrictions were lifted. While Schulman is banking on investor appetite for the stock based on the company’s revenue growth and store expansion plans, turbulent markets have punished unprofitable companies. And despite its expansion-fueled revenue growth of about 13% to $564 million last year, the company is operating at a net loss according to its securities filings. (Net losses grew from $37 million to $59 million last year according to the filings––a nearly 60% increase.)
In response to questions about Cava’s profitability and net losses, Schulman pointed to the growth of its stores and cited infrastructure investments, like manufacturing facilities and digital order software, as a way to increase profitability going forward. “We get very excited by the rapid growth of our restaurant level profits,” said Schulman.
Cava is also still in the process of converting its acquired Zoe’s Kitchen closed branches into Cava joints. Schulman explained that converting the branches is about half the price of opening a new branch. Yet when the conversion of the Zoe’s Kitchen branches is finished, which the company expects to be in the fall of 2023, opening new stores will become more capital intensive for Cava. “We expect that the capital expenditure requirements to open a new restaurant will be significantly higher than we have experienced in the past few years,” the company’s filing explains.
When asked about what he would say to those who thought the company’s target valuation was too high given the company’s lack of profitability, Schulman said he is focusing on the product and its plans for expansion. “Valuation is just a reflection of the investor’s conviction in the story. We’re focused on putting our heads down and doing what we’ve always done over these last twelve years,” he explained.
On the leadership front, one name closely associated with Cava is the former CEO of fast-casual spot Panera, Ron Shaich. His investment arm financed the Zoe’s Kitchen acquisition, he is the chair of the board of directors, and according to the firm’s filing, he is a stakeholder in the business.
However the stock trades today, the company’s IPO will be closely watched as a bellwether for companies thinking of testing the markets.
See you tomorrow,
Lucy Brewster
Twitter: @lucyrbrewster
Email:Lucille.brewster@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
VENTURE DEALS
- Primer Technologies, an Arlington, Va.- and San Francisco-based A.I. and machine learning technology firm, raised $69 million in Series D funding. Addition led the round and was joined by the U.S. Innovative Technology Fund.
- Striveworks, an Austin-based machine learning operations provider for enterprise data science and analytics teams, raised $33 million in funding led by Centana Growth Partners.
- Paro, a Chicago-based finance and accounting solutions marketplace, raised $25 million in Series C funding. Top Tier Capital Partners led the round and was joined by Madrona Venture Group, Revolution Ventures, and Sierra Ventures.
- Medivis, a New York-based augmented reality surgery platform, raised $20 million in Series A funding. Thrive Capital led the round and was joined by Initialized Capital, Mayo Clinic, 35V, Bob Iger, and other angels.
- Nelly, a Berlin-based documentation and payment processing software platform for medical practices, raised €15 million ($16.26 million) in Series A funding. Lakestar led the round and was joined by b2venture and Motive Ventures.
- Trust Lab, a Palo Alto-based internet trust and safety platform, raised $15 million in Series A funding co-led by U.S. Venture Partners and Foundation Capital.
- Deepchecks, a Tel Aviv-based continuous machine learning validation platform, raised $14 million in seed funding. Alpha Wave Ventures led the round and was joined by Hetz Ventures and Grove Ventures.
- Pebble Mobility, a Sunnyvale, Calif.-based electric RV company, raised $13.6 million in funding. Lightspeed, Vision+, and UpHonest Capital invested in the round.
- HELIXintel, a Buffalo, N.Y.-based building management, predictive analytics, and equipment management solutions platform, raised $11 million in Series A funding. National Grid Partners led the round and was joined by Munich Re Ventures, Stellifi, Motivate Ventures, and others.
- SPARETECH, a Stuttgart, Germany-based spare part management SaaS platform, raised €10 million ($10.83 million) in funding. Insight Partners, Headline, and others invested in the round.
- Standard Fleet, a San Francisco-based electric vehicle fleet management platform, raised $7 million in seed funding co-led by UP2398 and Canvas Ventures.
- Meshcapade, a Tübingen, Germany-based A.I. solutions company for modeling, analysis, and synthesis of 3D digital humans in motion, raised $6 million in seed funding led by Matrix.
- STAT Health, a Boston-based in-ear wearable company, raised $5.175 million in seed funding. J2 Ventures, BonAngels Venture Partners, and other angels invested in the round.
- Sol, a San Francisco-based wearable tech reading company, raised $5 million in seed funding. Initialized Capital led the round and was joined by Founders Fund, Elementum Ventures, Long Journey, Anorak, and others.
- One Future Football, a Melbourne-based virtual global soccer league, raised $3 million in pre-seed funding led by Blackbird Ventures.
- UNCAGED Innovations, a New York-based sustainable leather alternatives company, raised $2 million in pre-seed funding. InMotion Ventures, VegInvest, Stray Dog Capital, Alwyn Capital, Hack Capital, and GlassWalls Syndicate invested in the round.
- Versed, a remote-based A.I. game creation platform, raised €1.6 million ($1.73 million) in pre-seed funding. Gradient Ventures led the round and was joined by Cherry Ventures.
- Masthead Data, a Toronto-based data observability platform, raised $1.3 million in pre-seed funding. focal led the round and was joined by SMOK Ventures, DEPO Ventures, Monochrome, Alchemist Accelerator, and other angels.
- Finfra, a Jakarta-based white-labeled lending products integration platform, raised $1 million in funding. DSX Ventures, Seedstars International Ventures, Cento Ventures, Fintech Nation, FirstPick, BADideas Fund, and Hustle Fund invested in the round.
PRIVATE EQUITY
- Ardian acquired a majority stake in Tom Barrow Company, an Atlanta-based commercial HVAC solutions provider. Financial terms were not disclosed.
- Ares Management’s Private Equity Group agreed to acquire a minority stake in Extreme Reach, a Dedham, Mass.-based creative logistics platform. Financial terms were not disclosed.
- Arlington Capital Partners acquired Pegasus Steel, a Charleston, S.C.-based fabricated steel structures provider for the construction of submarines, aircraft carriers, and other naval and industrial systems. Financial terms were not disclosed.
- Auxo Investment Partners acquired SOS Manufacturing, a Roberts, Wis.-based wire harnesses and cable assemblies manufacturer. Financial terms were not disclosed.
- Slate Capital Group acquired Cumberland Diversified Metals, a Cleveland-based specialty metals distributor. Financial terms were not disclosed.
- Transom Capital Group acquired Aden & Anais, a New York-based infant products designer and manufacturer. Financial terms were not disclosed.
IPOS
- WE Soda, a London-based natural soda ash producer, withdrew its plans for an initial public offering in London. The deal was planned to be valued at around $7.5 billion.
FUNDS + FUNDS OF FUNDS
- Canva, a Sydney-based visual communication platform, allocated $50 million for a fund focused on app developers.
PEOPLE
- Capitol Meridian Partners, a Washington, D.C.-based investment firm, hired Tiffanny Gates as an operating partner. Formerly, she was with Accenture Federal Services.
- MidOcean Partners, a New York-based alternative asset manager, hired Ravi Saligram as an operating partner. Formerly, he was with Newell Brands.
- TTV Capital, an Atlanta-based venture capital firm, hired Paul Todd as a venture partner. Formerly, he was with Global Payments.
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