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Late Thursday, CKE Restaurants announced that their planned initial public offering (IPO), to return to the New York Stock Exchange, had been cancelled due to “market conditions.” Market conditions is Wall Street speak for that investor demand for the hoped $14 to $16 stock was too weak.
The offering was withdrawn at the last moment, just before its scheduled debut Friday.
The parent of the 3400 units Carl’s and Hardee’s was taken private in 2010 by the Apollo Private Equity Group, and hoped to reenter the market based on improved same store sales results at both brands and perceived market appetite for restaurant stocks. The problem is that restaurants sector sales conditions have weakened almost globally in the last 50 days, and four other restaurant IPOs had already went public since June. For example, McDonalds (MCD), the symbolic restaurant bellwether reported an earnings miss in July and this week reported negative same store sales in all major regions.
CKE will be embarrassed, as will the big investment banks marketing the deal (Morgan Stanley, Citi, Goldman Sachs were the leads, and six others). Their time is lost and success fees aren’t paid.
There should be no direct impact to franchisees. CKE will continue to operate and continue on its operating plan. The IPO proceeds were to be used to pay down debt.
Other than weakening restaurant industry fundamentals, here were the other issues with the CKE offering: