March 17, 2020
Size Announced: $75 million
Size Priced: $150 million
Announced Offering: “At the Market” (ATM) equity offering announced pre-open 17-Apr
Amount Sold in ATM: $10 million
Second Offering: $140mm underwritten offering announced at the close on 17-Apr
Pre-Announce Price: $42.93
Offer Price: $41.00
File-to-Offer Discount: 4.5%
Use of Proceeds: Strengthen the company’s balance sheet, general corporate purposes, and resume execution of long-term growth strategy
Banks: JPM, BofA, Wells
Size Priced: $150 million
Announced Offering: “At the Market” (ATM) equity offering announced pre-open 17-Apr
Amount Sold in ATM: $10 million
Second Offering: $140mm underwritten offering announced at the close on 17-Apr
Pre-Announce Price: $42.93
Offer Price: $41.00
File-to-Offer Discount: 4.5%
Use of Proceeds: Strengthen the company’s balance sheet, general corporate purposes, and resume execution of long-term growth strategy
Banks: JPM, BofA, Wells
$150mm Shake Shack Equity Offering
Capital Structure Advice in Economic Turmoil
- Company sought to raise capital during a period of weakened sales and negative cash flow due to Covid-19 and social distancing policies
- Matthews South advised the Company on the relative merits of public and private market financing alternatives: PIPE, convertible debt, Main Street Loan Program, revolver amendment, bank loan and equity
Multi-Pronged Approach in Stressed Market Conditions
- Given extreme market volatility, especially in Covid-19-exposed sectors, Matthews South advocated a multi-pronged approach, with the Company preparing for a convertible bond deal as well as an equity offering (marketed and ATM)
Non-Traditional Execution to Maximize Certainty
- Matthews South recommended a $75mm ATM equity offering to begin on Friday April 17, while being prepared to execute an underwritten offering if the Company received strong reverse-inquiries
- ATMs are not favored by major banks (largely due to reduced fees and league table credit)
- Given the significant liquidity in SHAK stock, the ATM would enable the Company to efficiently raise equity over time, without the execution risk and uncertain file-to-offer discount of a more standard wall-cross marketing process
Execution
- The stock reacted in a measured way to announcement of the ATM program, allowing the Company to sell $10mm during the day
- In addition, the ATM announcement triggered reverse inquiry from investors that allowed the company to execute a $140mm underwritten offering
- Company raised $150mm in total
Shares were sold at a 4.5% discount to pre-announce closing price
