Chipotle Mexican Grill’s already-spicy initial stock sale got even hotter Wednesday.
The Denver-based “fast-casual” dining chain set its initial share price at $22 Wednesday, the second time this week the company has bumped up the starting price.
Before underwriting expenses, fees and discounts, the 7.9 million-share offering is worth $173.8 million. Based on the total number of shares outstanding, Chipotle will have an estimated market value of $715 million.
The company will begin trading today on the New York Stock Exchange under the ticker symbol CMG.
Morgan Stanley and S.G. Cowen & Co. were the lead underwriters.
Investor demand for the IPO has been one of the strongest for a Colorado-based company since the dot-com offerings of the late 1990s, said Tom Coxhead, senior vice president of RBC Dain Rauscher in Denver.
“It’s a little reminiscent of the boom days,” said Coxhead, whose company helped underwrite the sale. “We’ve known it was going to be a hot deal for several weeks.”
Coxhead said his office was allocated “a small number” of shares, with the limited amount going to the largest and longest-standing clients.
“The demand was strong nationwide,” he said.
Coxhead cautioned investors looking to pick up Chipotle shares on the secondary market to be patient and “not chase the stock.”
On Monday, Chipotle upped its forecast price from an earlier range of $15.50 to $17.50 to between $18 and $20.
Based on the previous projections, Chipotle expected total proceeds after expenses to be $105 million, an SEC filing showed.
The company intends to use the proceeds to maintain existing stores and open as many as 90 stores during the next year.
It also plans to repay $30 million to its parent, hamburger giant McDonald’s Corp., which purchased Chipotle in 1998 and will retain a majority stake in the company after the IPO.
Chipotle, which started in 1993 as a single store near the University of Denver campus, operates 489 locations in 22 states. It posted a 33 percent revenue increase for the nine months ended Sept. 30, according to SEC filings.
The company has plenty of geographic territory to grow into, Sam Snyder, a research analyst for Renaissance Capital, told The Denver Post.
And with McDonald’s real- estate expertise and purchasing power, Chipotle could be primed to expand profit margins and grow its earnings, said Snyder, whose Greenwich, Conn.-based firm tracks IPOs.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
