Please ensure Javascript is enabled for purposes of website accessibility

Shake Shack Floating More Than 3.4 Million New Shares of Stock

By Eric Volkman – Updated Apr 20, 2020 at 1:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The burger joint operator will receive gross proceeds of over $136 million from the issue.

Shortly after announcing it would return a loan from the government's Small Business Administration (SBA), Shake Shack (SHAK 4.59%) filed a prospectus for a new share sale. The company will sell just over 3.4 million shares of its Class A common stock to the underwriters of the issue, who will go on to sell them to investors.

The underwriting syndicate, led by JPMorgan Chase unit J.P. Morgan Securities, and including Bank of America Securities and Wells Fargo Securities, is paying $39.77 per share for the stock. This should raise nearly $136 million in gross proceeds for the hamburger restaurant chain operator.

A cheeseburger on a wooden board.

Image source: Getty Images.

That amount is far higher than the $10 million loan Shake Shack secured from the SBA's Paycheck Protection Program (PPP). Those monies were returned in their entirety by the company, following outcry from the public after the PPP's funds ran dry.

After the issue, Shake Shack will have slightly more than 37.8 million shares outstanding.

The company said it will use the proceeds from its new share issue "for working capital and other general corporate purposes." It did not get more specific.

Restaurant chains have been profoundly affected by the wide business shutdowns mandated as part of an effort to mitigate the SARS-CoV-2 coronavirus outbreak. Although restaurants are generally allowed to accept takeout and delivery orders, the lack of in-store traffic is damaging their finances.

Although it's hard to tell whether it was because the company returned the PPP money, or will soon have more funds in its coffers (or perhaps both), Shake Shack shares were doing well in early afternoon trading Monday. They were up by nearly 5.2%, in contrast to the slump of the broader equities market and numerous top stocks.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Shake Shack Inc. Stock Quote
Shake Shack Inc.
SHAK
$48.56 (4.59%) $2.13
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$31.07 (1.64%) $0.50
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$107.99 (2.02%) $2.14
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$40.81 (1.95%) $0.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.