Dive Brief:

• First Watch Restaurant Group announced a secondary public offering Monday with plans to sell 4.5 million shares of common stock. This announcement comes less than a year after the chain, which is owned by private equity firm Advent International, went public.
• Selling stockholders plan to give underwriters a 30-day option to purchase an additional 675,000 shares of common stock at the public offering price, and the selling stockholders will receive all proceeds from the offering.
• Secondary offerings allow public companies to raise money quickly because they sell shares that were previously held in reserve. The money is typically used to fund expansion or to add liquidity.

Dive Insight:

First Watch’s secondary offering comes weeks after Portillo’s announced a similar move. This activity could signal increasing confidence in the market after a slow IPO year compared to 2021. First Watch and Portillo’s are two of five restaurant companies that went public last year. Though at least one restaurant operator had an IPO this year, the pace of offerings has slowed down.

These secondary offerings also suggest these companies are in early-stage growth periods with plenty of white space ahead of them. First Watch has more than 445 restaurants in 28 states, and is eyeing a footprint of about 2,200 locations.  

The secondary IPO will likely accelerate First Watch’s growth momentum as it infuses new capital into the company following a strong Q2. First Watch’s same-store sales rose by over 13.4% and traffic increased by over 8%. The company has six restaurants scheduled to open by the end of 2022.

However, secondary offerings can be risky for existing investors. First Watch’s stock dropped by more than 8% on Monday after the announcement.

BofA Securities, Goldman Sachs and Jefferies are the joint lead book-running managers for the proposed offering.