IPOBoutique Brief 3.12.2015 – Recent IPOs Retreat

Two of the most widely talked about IPOs so far of 2015, Shake Shack (NYSE:SHAK) & Box (NYSE:BOX), released their first earnings report on Wednesday and both disappointed.

Shake Shack posted a fourth quarter loss of $0.05 versus an expected loss of $0.02.  And Box posted a wider than expected loss as the company ramps up investing. Shake Shack is down around 8% in the pre-market while Box is down nearly 15%.

While the company’s share the fact that they have debuted in 2015–and debuted rather succesfully–these two company’s are a clear example of how the sizzle, at the present time, is a lot meatier than the steak.

Shake Shack reported sales of just $34.5 million last quarter. That’s a small number when you compare it with the $500+ million market cap it had prior to yesterday’s earnings report.  Box is a young company who is using money raised from the IPO to gain market share. Both company’s have plans for expansion, but, investors likely need to realize that these growth stories need time to pan out.

The sometimes harsh post-IPO reality is that ‘time’ is not afforded in relation to the stock price which makes investors anxious.

This can only further demonstrate why many high-beta companies are choosing to go the way of private funding through funds and venture capitalists rather than take the company public only to stumble after the first earnings report a la Shake Shack and Box.