Sweetgreen Inc. shares jumped 77% in their market debut Thursday, the latest new offering to surge on its first day of trading.
Shares of the salad chain closed at $49.50, valuing Sweetgreen—which isn’t profitable—at more than $6 billion on a fully diluted basis. Sweetgreen joins , and software maker Braze Inc. in producing big gains on their first day of trading this month.
Sweetgreen...
Sweetgreen Inc. shares jumped 77% in their market debut Thursday, the latest new offering to surge on its first day of trading.
Shares of the salad chain closed at $49.50, valuing Sweetgreen—which isn’t profitable—at more than $6 billion on a fully diluted basis. Sweetgreen joins electric-truck maker Rivian Automotive Inc. , sneaker maker Allbirds Inc. and software maker Braze Inc. in producing big gains on their first day of trading this month.
Sweetgreen co-founder and Chief Executive Jonathan Neman said Thursday that Sweetgreen intends to use much of the new investment to open new U.S. locations. “The major focus is continuing to expand our footprint into as many communities as possible,” he said in an interview.
Founded in 2007 by three 22-year-olds, Sweetgreen is a fast-food restaurant brand with 140 restaurants across 13 states and Washington, D.C. The company has built a supply chain around more than 200 domestic food partners, such as bakers and farmers, to source its ingredients.
The company is coming public as the competitive restaurant industry continues to feel the disruptions caused by the Covid-19 pandemic. The pandemic has rattled supply chains, raised labor and product costs, and kept people out of offices, a key source of traffic at Sweetgreen’s urban locations during lunch hours.
Sweetgreen’s profit margins and average sales per restaurant took a hit during the pandemic, the company’s pre-IPO filing showed. The chain reported a restaurant-level profit margin of 12% this year through Sept. 26, down from 16% in 2019.
Mr. Neman said Sweetgreen is adding more stores in suburban areas, which have generally done better during the pandemic as more people worked from home. The company has invested in technology to help with its to-go and online sales.
“We really used the crisis in a lot of ways to reset,” he said.
Sweetgreen plans to open at least 30 company-owned restaurants in the U.S. this year, and roughly double its total number of locations over the next three to five years, it said in the filing.
Mr. Neman and co-founder Nathaniel Ru served as co-chief executives from 2009 through December 2017, when Mr. Neman took the helm solely. Mr. Ru serves as chief brand officer, while its third co-founder, Nicolas Jammet, is the company’s chief concept officer.
Since the beginning of this year through to Sept. 26, Sweetgreen has generated revenue of $243.4 million. In comparison, the company had revenue of $274.2 million in 2019 and $220.6 million in 2020, hurt by pandemic-related disruptions.
So far this year, the company posted a net loss of $87 million. In 2020, the company had a loss of $141.6 million.
For many restaurants during the pandemic, digital orders have become a key source of revenue and an important way to interact with customers. From the beginning of 2021 through to Sept. 26, Sweetgreen’s total digital revenue was 68% of its total revenue.
Sales through its owned digital channels represented 43% and 56% of revenue in 2019 and 2020, increasing to 50% and 75%, respectively, when including orders placed through third-party delivery apps.
The stock opened Thursday at $52, above its better-than-expected initial-public-offering price of $28.
Sweetgreen is expected to get $364 million in proceeds from its IPO. The company plans to spend the money raised on general corporate purposes, which include working capital, operating expenses and capital expenditures, as well as developing the technology acquired in its recent acquisition of robotic-powered fast-food restaurant, Spyce Food Co.
It said it might also use a portion to buy other complementary businesses or technologies, adding that it doesn’t currently have any targets.
In mid-September of 2019, Sweetgreen got an injection of $150 million from investors, valuing it at the time of that funding round at $1.6 billion.
The top three stockholders of the company are entities affiliated with Fidelity Investments Inc., T. Rowe Price and Revolution Growth, respectively holding 13.4%, 10.6% and 7.8% before the IPO.
Mr. Neman has a 2.6% stake but has 22.8% of the shareholders’ total voting power. Those percentages are set to drop to 2.3% and roughly 21.5% following the offering.
Its directors include Neil Blumenthal, co-CEO of eyeglass maker Warby Parker Inc., which also recently went public; America Online co-founder Stephen Case, who is also chief executive of investment firm Revolution; and Valerie Jarrett, a former senior adviser to President Barack Obama.
Write to Heather Haddon at heather.haddon@wsj.com
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