Mediterranean chain Cava has managed to end the IPO drought after debuting last week. Axios Business Editor Dan Primack breaks down the restaurant's outlook on fast casual dining trends, while also commenting on Blue Owl Capital and Vice Media.
Video Transcript
- Cava took the market by storm when it IPO'd on Thursday, soaring to more than twice its initial $22 price tag. Now, trading just over 38 bucks a share. The fast casual restaurant has ended the IPO drought. Could there be more to come? Joining us now is Dan Primack-- "Axios" business editor. Now, Dan, you recently sat down with Cava chairman, Ron Sheikh. What do you think-- I'm going to throw out a pun here-- was the company's secret sauce, if you will when he reflects on last week?
DAN PRIMACK: The company's secret sauce from Ron's perspective really is its type of food, which is Mediterranean, which is something we haven't really seen done at scale in fast casual. It is this type of food that is the actual number one diet. When people look up diets and sort of food they should eat, number one recommended by physicians. So from his perspective, it was this niche of a niche in fast casual-- a niche of the overall restaurant industry that wasn't yet being served.
- It's so interesting, Dan. It's Julie, here. Because just because something is delicious-- and I will say I'll cop to being a Cava fan-- doesn't mean it's going to be successful from an investment point of view. I look at the Sweetgreen example. And I wonder because I know you talk to a lot of investors and talk to a lot of dealmakers. What the appetite-- sorry-- is for deals like this right now and for offerings like this right now, when the capital markets have been largely closed? I mean, Cava was a surprise.
DAN PRIMACK: Yeah. Cavs was a surprise, and again, it's a little bit of a one-off, and there are definitely some differences between it and Sweetgreen, particularly when you look at the unit economics and also even a little bit of the physical locations in terms of geography of where they've each focused. But in general, I think what Cava says is that institutional investors-- those hedge funds, those mutual fund managers-- are indeed once again interested in new issues after taking 18 to 24 months off. There going to be a bunch more Cavas, per se, in terms of fast casual chains that are going to go public. There's just not a huge pipeline of those.
But the fact that there are investors who are willing to look at a new name could get a lot of other companies who do very different things-- SaaS companies, et cetera, interested, and in the next two weeks, or next week and a half really, we're going to probably see three more IPOs-- one from an energy company, one from an insurance company, and one from a retail company, kind of a thrift store operator. All of which, again, are very different. If those each or two of the three are successful just in terms of where they price and trade, then you could really see-- if not a flood at least a pretty good wave after Labor Day.
- So Dan, I want to expand on what Julie was just talking about, especially like Cava. I mean, this could be a fad. I mean, and look at their numbers. They still posted a loss last year. They say they're on this path to profitability. Do their expansion plans indicate that they won't just be a flash in the pan, if you will? Sorry for another pun.
DAN PRIMACK: Well, look, I mean, for sure. If you look at Sweetgreen three or four days after it had gone public, you'd see the chart would look fairly similar-- a good price and then a big, big spike, and obviously, it's come down over time. Cava has very, very big expansion plans. They want to be-- there are 250, 260 stores, I think, right now. They want to be at a thousand or so in several years. They are plugging lots of money into this business. There's a time-- we'll tell it is certainly true the fast casual chains become essential to people, and then sometimes get so ubiquitous that they become uncool.
That they essentially become-- kind of arguably what's happened to Starbucks and McDonald's to a certain extent. Companies that do very well, but it's no longer that experience. You don't usually say, hey, let's all go out to lunch at McDonald's if you're at the office, whereas people actually might have 40, 50 years ago. It's a risk, but right now early on their bet is that they're going to end up becoming more like Chipotle than like Sweetgreen.
- And switching gears because your purview is pretty broad down in terms of what you cover in the deal space. I was noticing your coverage of Blue Owl this morning, which is a Capital Management firm where there is some infighting that looks like it's going on. But it's not just there. I've been reading about 2 sigma, which is another firm where there's infighting or O'Day Capital Management, which is a different situation. There's alleged sexual assault involved with that that is causing the implosion of the firm, but it's just that there are these visible blowups within that world right now. Do you think it's a sign of anything bigger?
DAN PRIMACK: Not necessarily. I mean, as you said, the sexual assault one is obviously separate than anything that's happening. You know, blew out-- there's no allegations of any wrongdoing at all. It seems to just be a real culture clash between two organizations. Blue Owl was formed via the merger a couple of years ago of two different organizations, which culturally were a weird fit in the first place, and it's like you've had mild friction for years, and now, it's just gotten raw over time.
No, look, when you've got very successful, very powerful people, as you can have when you have co-founders of a firm or again, founders of two different firms or co-founders of two different firms, these are people with very strong personalities and very-- people who are very confident in their view of how things should work going forward, and clashes are part and parcel of that.
- Yeah. It does seem like it when you get these big personalities, who have certain ideas about how things should be invested. And then while we have you, there's one more I want to sneak in Dan, and that has to do with what looks like a bidding war for Vice or at least a lot of interest in that media property, and I know some of your colleagues are covering that as well. Is Vice a hot property right now? Is it-- do you expect it--
DAN PRIMACK: No.
- --to be-- no.
DAN PRIMACK: Well, it's-- well, let me rephrase that. I'm sorry. It is a hot property in the sense of there are a lot of suitors who are looking for, but they're all looking to get it at a very cheap price because it is obviously-- you're talking about a company that was valued in the billions and billions of dollars by the private market just a couple of years ago, and we're now talking about bids that will be in the low hundreds of millions. So it's hot. It's hot like a fire sale is hot. There's a bunch of people who are around it, but it is not the crown jewel that it was just a few years ago.
- Yes. Indeed. All right, Dan Primack. Thank you so much for covering a lot of different stuff for us, "Axios" business editor. Good to see you.
DAN PRIMACK: Thank you.
