We have all read many stories of those companies that started out of the back of someone’s home only to turn into multi-million dollar organizations. Well the story of the burger chain Shake Shack Inc. is no different. Starting off as only a hot dog stand in Madison Square Park in New York, this burger chain is now ready to step into the spotlight after filing for an initial public offering (IPO) yesterday. The company is hoping to list on the New York Stock Exchange under the symbol ‘SHAK’. In August this year, Reuters reported that the Shake Shack had hired the relevant management for an IPO. It is well known that casual restaurants are popular among investors and this was evident when Zoe’s Kitchen Inc. and El Pollo Loco Holdings Inc., both casual dining chains, also had successful offerings this year.
In 2001, Daniel Meyer, a restauranteur, founded Shake Shack. This food chain is well-known for their Shackburgers, hot-dogs with flat tops as well as milkshakes and they have 63 restaurants located around the U.S. east coast as well as globally in Dubai, Istanbul and London. Other popular New York restaurants also fall under the Meyer's USHG (Union Square Hospitality Group) such as the Union Square Café and the Gramercy Tavern.
Shake Shack has stated that the IPO would be used as a means to raise over $100 million in order to purchase interests of common membership of the predecessor of Shake Shack, SSE Holdings LLC. The underwriters of this IPO include Goldman Sachs, Morgan Stanley and J.P. Morgan and at this stage, no information has been provided regarding the expected cost of the shares as well as the number of shares that will be available. In its last earnings report, Shake Shack reported that its net income had declined by 20% to $3.55 million in the third quarter while their revenue increased by 41% to $83.76 million.
On Monday, the S&P 500 index (SPX) hit another record close while the Dow Jones Industrial Average (DJIA) snapped its 7-day winning streak. Investor sentiment was negatively impacted with renewed uncertainty about the political standpoint in Greece. Yesterday, the Greek parliament rejected the candidate presented by Antonis Samara, the Greek Prime Minister. This marked the third and the final presidential vote. As a result, the existing parliament will need to be dissolved while an early election will also now need to take place.
With the utilities sector gaining the most among the ten sectors, the SPX rose 0.1% or 1.80 points, to close at 2,090.57. This marked the 53rd record close for this index in 2014 which is almost one a week and the SPX is already up 13.1% for the year. Meanwhile the Dow Jones pulled back from the record close it reached on Friday, breaking its 7-day winning streak. Already up 8.8% in 2014, the DJIA declined 0.1% or 15.48 points to end at 18,038.23. The top performer on the Dow Jones was Home Depot Inc. (NYSE:HD) whose shares advanced 0.78 points or 0.75% to trade at 104.53 at the close. Also on the upside was the Nasdaq Composite index (COMP) which advanced 0.05 points to close up at 4,806.91. According to strategists on Wall Street, investors can expect to see more gains in the U.S. stock market in 2015 with lower energy prices and an improved economy which will offset the interest rate hikes expected by the Federal Reserve in the New Year.
On Monday, the Japanese yen (JPY) edged down against the U.S. dollar (USD). This came in response to the announcement of a new round of stimulus measures by Japan. In European trading, the USD/JPY currency pair hit 120.61 in the afternoon. This marked the pair’s highest level since the 24th of December and the USD/JPY finally added 0.16%, to trade at 120.50. The JPY also traded lower against the euro, with EUR/JPY trading at 146.95, up 0.26%. Over the weekend, on Saturday, stimulus spending worth over $29 billion was approved by the Japanese government. The aim of these measures is to boost the lagging households and regions in the country while also increasing Japan’s GDP (gross domestic product) by 0.7 percent. In response to positive data out of the U.S. last week, the greenback remained broadly supported. Data showed that the GDP in the U.S. rose 5.0% in the 3rd quarter which exceeded analyst expectations for an increase of 4.3%. In the second quarter, the GDP was at 3.9% so this growth rate has boosted investor optimism that the economy in the U.S. is in recovery mode. This has also enhanced expectations that the Federal Reserve will hike interest rates in 2015.
Just when you thought things couldn’t get any worse, on Tuesday, the price of Brent oil fell to a new five and a half year low, near $57 per barrel. This came in response to concerns to a glut in global supply despite the current tensions in Libya which have disrupted outputs. After hitting a low of $57.25 earlier in the session, at 0626 GMT, Brent for February delivery traded at $57.32, down 56 cents. This marked the lowest level in the last 5 years. U.S. crude for February delivery also declined to $53.12, down 49 cents.
According to Wang Tao, a technical analyst at Reuters, due to the current downtrend of oil prices, we can expect Brent to decline to $54.98 while U.S. crude could drop as low as $52 a barrel. With all this in mind, investors are now focusing on the weekly inventory data which is due out today in the U.S. by the American Petroleum Institute. On Wednesday, the U.S. Department of Energy's Energy Information Administration will release its data on oil supplies.