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Shares of the Shake Shack the trendy chain of hamburger shops soared by 150% on Friday in the first day of trading, valuing the burger business that grew from a hotdog cart in Madison Square Park in New York City at close to $2 billion.
The debut follows a successful initial public listing of Habit Restaurants two months ago highlighting the strong appetite investors have for shares in companies serving premium burgers.
Shares of Shake Shack hit $52.49 for a high on the New York Stock Exchange, which was well above the $21 offer price, raising questions of whether the stock had been overvalued.
At the stocks high, Daniel Meyer the founder who has a 21% stake was worth $390 million.
Meyer, also is the owner of popular restaurants in New York including Gramercy Tavern, Union Square Café and Blue Smoke, opened his first Shake Shack back in 2004.
In the past 11 years, the chain has earned a loyal following thanks to its crinkle fries, antibiotic- and hormone free burgers and rich milkshakes.
One analyst said that the restaurant chain would need years and years of explosive growth to justify such a stock price.
Shake Shack took in $105 million from its IPO. The underwriters Morgan Stanley and JPMorgan originally set the price range of $14 to $16 a share, but raised that later to $17 to $19 because of strong demand.
Premium chains have outperformed in the burger industry, driven from great demand from young and affluent consumers.
Customers of Shake Shack spend an average of $30 per meal for two, which is considerably more than those who dine at McDonald’s the struggling fast food chain.
Sales at the new premium chains such as Smashburger and Five Guys increased 9% during 2013, while sales overall at burger chains in general including McDonald’s dropped 1%.
In 2013, an industry analyst put a value on the burger market at $72 billion.
Shake Shack has 63 restaurants with over half outside the U.S.
