Charlotte-based Bojangles’ is expected to make its debut as a public company late next week, according to Renaissance Capital, which manages funds focused on initial public offerings.
The restaurant chain known for its fried chicken, biscuits and sweet tea said this week that it plans to sell 6.2 million shares at a price between $15 and $17 in its initial public offering, raising more than $100 million for the company’s biggest investor.
Next week, the banks underwriting the offering are expected to settle on a final initial stock price and the shares will begin trading on the NASDAQ exchange. That will give investors a chance to buy a piece of a company founded in Charlotte in 1977 – and potentially enjoy a bump in the share price.
“It’s no secret that restaurant IPOs have been pretty well received lately,” said Will Preston, a research analyst with Renaissance Capital, as lower unemployment and an improved economy boost consumer spending. “But expect some price volatility when it starts trading.”
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Shares in burger chain Shake Shack, for example, are up more than 200 percent since their debut in January, while shares in sandwich maker Potbelly are up only about 7 percent from their initial price in October 2013 after more than doubling in the first day of trading.
Bojangles’ IPO could raise about $122 million, if underwriters exercise their option to buy an additional 937,500 shares. The stock is expected to trade under the ticker symbol “BOJA.”
As they prepare for the IPO next week, Bojangles’ executives and underwriters are now in the “road show” phase of the offering, where they meet with large institutional investors such as mutual funds and pension funds to gauge their interest in buying the stock and at what price.
Large institutions will typically gobble up the majority of the shares at the initial price, earning the biggest gains. But some will be reserved for individual investors to buy through brokerage firms, Preston said. Up to 5 percent of the shares for sale at the IPO price are reserved for directors, officers, employees, franchisees, business associates and other persons, according to the prospectus for the offering.
Even at the top end of the share price range of $17, Bojangles’ offering looks to be “moderately priced,” said Brian Hamilton, chairman of Sageworks, a research firm that analyzes private companies. At that price, the company would be valued at 23 times trailing profits and 1.4 times trailing revenues, he said.
Underwriters want to pick a price that raises sufficient money for the company or its key shareholders, while also leaving room for the stock to increase for the investors buying the new shares, Hamilton said.
“With a reasonable valuation and solid fundamentals, Bojangles’ looks to be a strong IPO all the way around,” he said.
After the IPO, Bojangles’ will have 35.9 million shares outstanding, according to securities filings. At $17, the company would have a total market value of about $610 million. Atlanta-based rival Popeyes Louisiana Kitchen had a market value of about $1.37 billion on Tuesday.
Even if investors don’t get in on the first day of trading, they can still enjoy a run-up in the share price, Preston said. Since 2013, the average after-market return for restaurant stocks – the increase in the share price since the close of the first day of trading – is 16.4 percent, Preston said.
“You do generally see a large pop on the first day,” he said, “but there is some opportunity in the after-market to generate a positive return.”
The proceeds of the offering will go to some of the company’s key investors, not Bojangles’ itself. According to the filing Monday, the largest holder of Bojangles’ shares, private equity firm Advent International, could sell up to 6.8 million shares, if the underwriters buy their extra allotment.
Bojangles’ has said it plans a big expansion, though it will remain mostly in areas where it already has a presence. The company operates 622 restaurants in 10 states and the District of Columbia, though two-thirds of its restaurants are in the Carolinas.
The chain attempted a significant expansion in the 1980s, growing into New York and Honduras, before shrinking to fewer than 200 restaurants.
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