Friday was Bo Time on Wall Street.
Shares in Charlotte-based Bojangles’ rose as much as 47 percent in their trading debut, showing investors remain hungry for restaurant stocks. By the closing bell, the stock was up 25 percent.
To kick off the chain’s initial public offering, more than 100 Bojangles’ executives, workers and their families were in New York handing out Cajun chicken filets and ham, egg and cheese biscuits for breakfast at the Nasdaq in Times Square.
In an interview with the Observer on Friday, CEO Clifton Rutledge said it was a “great day” for the Bojangles’ brand.
“It’s a landmark for our company, for all of our employees and our franchisees,” Rutledge said. “As we went across the country to get ready for this, the confidence level we saw from the investors that we talked to about our story and our brand, it’s been overwhelming.”
Trading on the Nasdaq under the ticker symbol BOJA, Bojangles’ shares opened at $26.55, climbed to nearly $28 and closed at $23.75. The IPO price set Thursday evening was $19.
The company picked a good day to go public, with the overall markets boosted by a positive jobs report.
Known for its chicken and biscuits, Bojangles’ started in Charlotte in 1977 and operates 622 restaurants in 10 states and the District of Columbia. Two-thirds of its restaurants are in the Carolinas. Bojangles’ has laid out a plan to expand after its IPO, mostly in its existing markets for now.
Responding to investor demand, the restaurant chain this week upped the number of shares it planned to sell in its IPO by 1.5 million to 7.75 million.
At the $19 IPO price, the offering raised around $147 million. The banks underwriting the IPO also have an option to buy an extra 1.16 million shares, which could boost the total proceeds.
The biggest IPO by a Charlotte-based company since at least 1980 came from health care company Premier, which raised $874 million from its 2013 stock sale, according to data provider Thomson Reuters. Bojangles’ IPO would be the 10th biggest by a Charlotte company since at least 1980.
The proceeds from the offering will go to certain Bojangles’ shareholders selling the stock, not the company itself. Private equity firm Advent International, the company’s biggest shareholder, could sell up to 8.4 million of the shares.
With 35.9 million shares outstanding, Bojangles’ had a total market value of $852 million at Friday’s close. That compares with Atlanta-based rival Popeyes Louisiana Kitchen at $1.3 billion.
Bojangles’ disclosed its plans to go public last month. Investment banks leading the offering were Bank of America Merrill Lynch, Wells Fargo Securities and Jefferies.
Before Friday’s debut, company executives went on an eight-day “road show” to meet with potential investors around the U.S., from New York to Chicago to Los Angeles.
“All those places we went to, there’s not a Bojangles’ in those towns,” said Rutledge, who became Bojangles’ CEO in January 2014 after more than four years at Texas-based Whataburger. “To see the interest ... was very refreshing.”
To help familiarize potential investors with menu items, the fast-food chain hosted a luncheon in New York last week, in addition to serving breakfast Friday at the Nasdaq.
“The hotels were nice enough to let us take over their kitchens, and we were able to bring our teams up and prepare it, making our biscuits from scratch right there in their kitchens,” Rutledge said of Bojangles’ signature items, which are baked fresh every 20 minutes.
At Friday’s close, Rutledge’s 203,574 Bojangles’ shares were worth $4.8 million.
Selling Twitter for Bojangles’
In the end, U.S. institutional investors made up the majority of the initial buyers of the stock, but the offering also drew takers from Europe, the Middle East and Southeast Asia, a person familiar with the matter said. Total demand for the transaction was $3.4 billion, meaning it was 23 times oversubscribed.
Big investors such as mutual funds and pension funds usually get the first crack at shares offered in an IPO, but once the stock starts trading, ordinary investors can jump in.
Analysts say Bojangles’, like other fast-casual chains that have gone public recently, has generated a lot of interest from ordinary investors who see it as a savvy investment opportunity. According to deal tracker Dealogic, over the past decade, the average one-day surge for restaurant stocks topped 40 percent.
One investor, James Jacobs of San Diego, said he bought Bojangles’ shares for $24.99 and will sell when the stock hits $50. “Many other restaurant IPOs have been doing so well the last year, such as Shake Shack, and I didn’t want to miss the boat,” Jacobs said.
Another investor, Matt Singley, a self-described “casual investor,” sold some of his Twitter stock Friday and bought Bojangles’.
“I live in Los Angeles, but my wife is from North Carolina,” Singley told the Observer. “It’s a fair valuation, and it’s got nowhere to go but up. I think it’s a good investment, and I love their chicken biscuits.”
Bojangles’ CEO says company’s expansion will be gradual
Bojangles’ plans to expand gradually and won’t be moving into any new states for at least five years, CEO Clifton Rutledge told the Observer on Friday.
“As we grow this great brand, you’re not going to see us jumping states or jumping to California or St. Louis,” Rutledge said. “We will grow out our adjacent states first, and we’ll do that at the same pace … that we’ve been doing for several years in a row now.”
Bojangles’ wants to expand the number of locations by 7 to 8 percent a year, mostly in markets in which it’s already concentrated, according to a securities filing last month. That would add up to 50 stores in the next year, and more each year after that.
When Bojangles’ tried to move too quickly into new markets in the 1980s, it faltered and scaled back to fewer than 200 restaurants. Analysts say the company’s challenge now is expanding its brand outside the Carolinas while remaining profitable.
“The stock will do what it’s going to do,” Rutledge said. “As far as this brand, we’ll be protective and very disciplined in how we grow.” Katherine Peralta