Sweetgreen leaves money in the salad bowl

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TORONTO, Nov 19 (Reuters Breakingviews) – Lettuce has by no means been this thrilling. Sweetgreen (SG.N) shares opened 86% learn extra above their initial public offering value of $28 per share in their debut on Thursday, valuing the U.S.-based takeout salad chain at about $5.5 billion. That’s roughly twice the $2.7 billion it had initially anticipated. Sweetgreen’s salads could also be wholesome, however this first-day blowout nearly definitely isn’t.

Based on its $52 opening value, Sweetgreen is price 25 occasions final 12 months’s gross sales. As a comparability, Chipotle (CMG.N), which sells Mexican quick meals, trades at 7 occasions, and Shake Shack (SHAK.N) at 5 occasions. That’s a excessive value for a corporation whose opponents embody all the things from McDonald’s (MCD.N) and Whole Foods to a selfmade ham sandwich.

As for Sweetgreen itself, it emerges with round $360 million in new money to take a position in its progress plans, which embody doubling the variety of shops. But if the firm had offered shares for simply $40 a share – midway between the IPO value and the opening value – it might have made about $160 million extra, sufficient to cowl an additional 12 months of its present losses. It could remorse leaving money in the salad bowl. (By Sharon Lam)

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Editing by John Foley and Thomas Shum

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The Sweetgreen logo is displayed on a banner, to celebrate the company's IPO, on the front facade of the New York Stock Exchange (NYSE) in New York City, U.S., November 18, 2021.   REUTERS/Shannon Stapleton