Daily Management Review

Australian IPO The Highest In 3 Years As Guzman Y Gomez Notes A 37% Surge On Debut


Australian IPO The Highest In 3 Years As Guzman Y Gomez Notes A 37% Surge On Debut
With its shares rising more than one-third on their first trading day on Thursday, the Mexican restaurant chain Guzman Y Gomez delivered Australia's greatest initial public offering start in three years and sent a positive message about investor mood.
In contrast to a flat market overall, the Sydney startup's stock started trading for A$29.90 at noon local time (0200 GMT), 36% over its A$22 issue price. By 0505 GMT, the shares had risen a further percentage point to A$30.30.
According to Dealogic, it was the largest first-day increase for a major Australian firm since 2021 and the third-best performing IPO in the nation in the previous five years.
Approximately one-sixth of the corporation, or A$335.1 million ($224 million), worth of new shares was offered for trade by the company.
The company's market capitalization increased from A$2.2 billion before to its trading debut to around A$3 billion as a result of the share price gain.
The firm predicted a second straight net loss for 2024 but a profit in 2025 in its IPO prospectus, and it laid out a strategy to catch up to McDonald's present store count in Australia in 20 years.
The first offering of Guzman Y Gomez (GYG) was not open to the public and consisted mostly of the sale of shares to franchise owners and current financiers. The Thursday share price spike indicates a positive outlook for the economy as a whole, following the 2022 and 2023 demand suppression caused by high interest rates and inflation.
Following a record 2021, Australian listings fell as the central bank raised interest rates to curb inflation and the pandemic stimulus payments ceased.
According to LSEG statistics, Australia has raised just A$98 million through IPOs so far in 2024, which is the second-lowest June half in almost a decade.
A minor initial public offering (IPO) for health services provider Freedom Care was managed by Novus Capital adviser Campbell Welch in November. There were 32 new listings in the nation in 2023, down from over 200 in 2021. "It proves the adage that you can list a good company even in a bad market," Welch said.
"It's pretty fully valued and a lot of things have to go right now to justify the valuation."
GYG's aim to add at least 30 shops year from the present 183 in Australia—a rate it has just once, in 2023—and its exclusion of store leasing obligations and share-based payments from profit estimates were the subjects of continuous headlines following the filing of a prospectus in May. Additionally, it has stores in Singapore, Japan, and the US.
According to the organisation, this is how franchise businesses often handle their expenditures in accounting.
Before trading began, GYG founder and co-CEO Steven Marks stated in a statement, "Once we're listed, the market will price us every day and our focus will be on the things we can control: selling burritos and delivering on our strategy."
The business did not immediately respond to requests for comment.
The stock was originally assessed at A$15 per share in a Morningstar client note, which stated that the firm, which had 3.5% of the fast food industry in the nation, lacked a competitive edge that would have allowed for its quick development.
Given its familiarity with Australians, Sebastian Evans, chief investment officer at NAOS Asset Management, stated that GYG's tiny share register and ambitious development story may sustain the stock.
"We will follow the business and have done so for some time, but we believe the significant ramp-up in store rollout and the proposed geographic split of these new stores adds to the amount of execution risk," Evans said.