It’s Bo-Time: Another Fast Food Chain Sets Terms for IPO

Fast food restaurant chain Bojangles’ (Nasdaq: BOJA) updated terms for an IPO on Monday afternoon. Bojangles is one of 12 deals already on the schedule for next week.

The company is offering 6.25 million shares at $15-$17. The total number of outstanding shares after the offering would be 35,903,836 which would value the company at $574.4 million if the deal was priced at the mid-point ($16) of the range.

Media coverage has already been sizzling:

• Streetwise Journal says Bojangles is established and growing nicely.
• MarketWatch gives investors six things to know about Bojangles before IPO.
• Bojangles’ is latest from flaming restaurant sector….says Fortune.Com.

But as we have seen with fast food, restaurant-chain IPOs of the recent past, these type of IPOs will likely not price at the mid-point of the range. IPO investors are paying up for growth and paying up big-time.

Case and point is the Shake Shack (NYSE: SHAK) IPO which debuted on January 30. The deal priced at $21.00 (well above the $14-$16 range) and opened with a 124% gain. The first trade was $47.00. The market digested those gains and have since paid up even more for $SHAK as the stock closed for trading on Monday (4/27) at $69.36.

Renaissance Capital had a nice graphic about how restaurant chains who have debuted since 2012 have performed.

As the chart shows, IPO investors are eating up stocks associated with restaurant chains

“IPO Investors have shown a willing to pay up for high-growth stocks in this sector,” senior research analyst at IPOBoutique.Com, Jeff Zell, said. “I expect the Bojangles’ IPO to be many-multiple times oversubscribed because everyone wants to own a piece of the next restaurant superstar. Investors are looking to find the next Chipotle, so to speak.”

The next question is how the IPO will be received in the roadshow by major players. But looking at the list of strong underwriters on the deal, big players will be first in line to order Bojangles’ issued stock.

Underwriters: BofA Merrill Lynch, Wells Fargo Securities, Jefferies

Co-Managers: Barclays, Goldman Sachs & Co., Piper Jaffray, William Blair, KeyBanc Capital Markets, RBC Capital Markets, Stephens Inc., SunTrust Robinson Humphrey