By Jessica Yun and Colin Kruger
Investors and employees of Mexican fast-food chain Guzman y Gomez whooped and cheered at midday on Thursday as the burrito maker clinched its place as the hottest float on the ASX in three years, with its market value soaring to more than $3 billion in its trading debut.
Its shares closed at $30 – more than 36 per cent above what investors paid in the blockbuster initial public offering under the ticker “GYG”, having opened their maiden session at that price.
Mexican food chain Guzman y Gomez investors and employees cheered as the company floated on the ASX at a valuation north of $3 billion.Credit: Dominic Lorrimer
“This is a big milestone for all of us, and it’s truly just the beginning,” GYG’s co-chief executive and co-founder Steven Marks said at the IPO ceremony at the Australian Securities Exchange in Sydney.
Marks grew emotional as he thanked his co-founder Robert Hazan, co-chief Hilton Brett, chair Guy Russo and identical twin brother Evan Marks, one of the business’ earliest investors and now the company’s third-largest shareholder, as well as his wife and various investors standing in the crowd, half of whom had donned black and yellow branded hoodies.
“It’s very emotional, and we’ve been working so hard for 20 years, and the value and culture is so strong, and we’re building this amazing business, and hopefully you can see that today,” he said.
Marks’ net worth swelled to more than $264 million based on his 8.81 million shares at $30 apiece, all of which he has retained saying he’s “never going away from GYG”. He also has more than 2 million share options due to vest by January 2026, worth around $30 million at current prices.
Demand from major investors saw GYG boost the stake sold in the float from $242.5 million to $335.1 million. Of this, $200 million is being invested by the company in further expansion, with the remaining $135 million going to investors who sold down their stakes.
Marks, a former Wall Street hedge fund manager, co-founded Guzman y Gomez with fellow New Yorker Robert Hazan in 2006. Since then, the business has grown to a chain of 185 stores across Australia, 16 in Singapore, five in Japan, and four in the US, only one outlet of which is profitable.
“We’re very optimistic – it’s going to take a little bit of time until we get the revenue where we have to, and the underlying economics,” Marks said.
The proceeds of the float will go towards boosting the Mexican chain’s growth in Australia. The company hopes to open 30 new restaurants in the 2025 financial year and eventually have more than 1000 restaurants in the next 20 years, which would put it on par with McDonald’s.
Guzman y Gomez co-founder Steven Marks watches the soaring stock raise the value of his stake to more than $240 million.Credit: Dominic Lorrimer
Marks said on Thursday the share price was something he couldn’t control and that he was not getting caught up in the massive first-day rise.
“Obviously, we can’t choose if people buy or sell,” he said. “We just got to run our business and make sure that you know, as a senior leadership team, that we deliver (on the) strategy.”
ASX listings group executive Blair Beaton said the burrito chain’s float was the largest the index had seen since November 2021, and a sign that demand for floats was starting to return.
“We expect it will serve as the impetus for a broader reopening of the IPO market and adds to the existing demand we’ve seen for secondary capital raisings in recent years,” Beaton said. “We remain optimistic that there will be more activity in the second half of this year.”
GYG attracted some controversy before the float due to its sky-high valuation, which means investors have to count on it to deliver on its massive expansion plans to justify even the $22 IPO price.
Prior to the float, Cyan Asset Management’s Dean Fergie said the lack of fresh investing options means investors would probably embrace the stock even at these valuations.
“Although this looks steep to us considering the modest profitability ($3.4 million forecast in financial year 2023-24), the stock may be well sought given the market has been starved of any sizeable IPOs for a long period of time,” he said.
TAMIM Asset Management also recommended caution ahead of the float, due to the high valuation and controversial treatment of lease liabilities in its share sale documents, which made the company valuation used by GYG in the float look more attractive.
“While GYG’s growth ambitions are impressive, investors would be wise to approach this IPO with caution,” TAMIM told its clients last week.
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