Update 10/23/2017: Fat Brands IPO set to begin trading today. Good luck to all longs. Here’s the press release:
Update 10/17/2017: Fat Brands IPO is fully subscribed according to BANQ.CO. Share are expected to begin trading on the Nasdaq on 10/23/2017 under the symbol “FAT”.
Fat Brands Inc. has filed a Form 1-A with the SEC to prepare for a Reg A+ IPO, a type of mini-IPO enabled by the passage of the JOBS Act of 2012. The Fat Brands IPO is NOW available for participation on BANQ.CO, the online division of Tripoint Global Equities, a registered broker/dealer and the same people that brought us the Myomo IPO.
Fat Brands is the newly formed company behind the iconic west coast burger chain Fatburger. Fatburger has served up “fresh, authentic, and tasty” food since the burger stand was opened in 1947. The company also owns the Buffalo’s Cafe and Buffalo’s Express brands.
Fat Brands was formed in March of 2017 and is currently wholly owned by Fog Cutter Capital Group (FCCG). The company bought Fatburger in 2003.
After the IPO is complete, Fog Cutter will own 80% and new shareholders will own 20%. 2,000,000 shares are now available to the public for $12 per share in this Reg A + IPO for a $96 million valuation.
The estimated $24 million proceeds ($21.2 million after fees) will be used to complete the purchase of two additional brands, Ponderosa and Bonanza from Homestyle Dining LLC and to pay off debt. The resulting company will have 300+ franchised stores operating or under construction in more than 20 countries.
The company expects to trade on the Nasdaq under the symbol “FAT”. The deal is expected to close on or around October 19th.
The Fatburger brand has a storied history lined with celebrity ownership and franchisees including Magic Johnson, Cher, David Spade, Kanye West. The Fat Brands CEO, Andrew Wiederhorn, was even featured on the TV show Undercover Boss in 2013.
In researching this IPO, I had the opportunity to speak to Andrew Wiederhorn who provided insight about the deal.
Please note: Before investing in this or any IPO, investors should perform their own due diligence. The mention of an IPO on Access IPOs is not a recommendation to buy or sell. We make readers aware of opportunities, but it’s up to the investor to decide if the opportunity is right for their own portfolio. Click here to read the latest SEC Filing. Also be sure to check out the investor presentation for tons of good information.
Why Reg A + IPO?
Fatburger has a dedicated customer base due to its high-quality food, iconic brand, and Los Angeles-based celebrity appeal.
Reg A + IPOs have many advantages for companies looking to raise capital. For one, filing requirements are less stringent and costly. More significantly, Reg A+ IPOs enable crowdfunding… to be able to raise money directly from investors in smaller investment lots.
It’s better for investors who would normally not invest or hope for an allocation through their broker, and better for the company who can directly access funds from loyal fans who are less likely to flip shares.
CEO Andrew Wiederhorn had this to say about using the Reg A+ IPO model:
We think this will be a great opportunity for all of our fans of the brand to participate because we have over a million digital media followers of our different brands. If we did a conventional IPO they wouldn’t be able to participate. There’s so much brand equity with Fatburger and Ponderosa so it’s a real opportunity for the fans to get engaged with a low minimum of $500.
Growth and Profitability
Fat Brands is profitable. It’s an “asset-light” business model, relying on franchisees to operate stores while collecting franchise fees and royalties. This model allows the company to scale business locations with limited increase in corporate overhead. Restaurateurs franchise the stores and operate under the guidance and support of the Fat Brands management.
This is one of the first Reg A deals that’s actually a very strong company from a cash flow standpoint, a profitability standpoint, and a growth standpoint… the business is extremely profitable and cash flow positive. – Andrew Weiderhorn
Between 2012 and 2016, the company achieved compound annual growth rates in net revenue, net income, and EBITDA of 9.9%, 40.0%, and 35.3%, respectively. EBITDA margin expanded from 27.2% to 64.3%.
They indicate in the SEC filing a multi-pronged strategy to grow even further including accelerating same-store sales, co-branding locations, and expanding into new locations with existing brands.
Perhaps the most compelling growth strategy is their plan to opportunistically acquire new brands. According to the SEC filing, two deals are already in the works to acquire an additional 110 branded stores. These stores will be acquired through a proposed new credit facility or by issuing new equity securities, possibly including preferred stock.
Profitability and cash flow will enable Fat Brands to pay a $0.48 dividend estimated to yield approximately 4%.
This is unusual for an IPOing company but a welcome component to this IPO, especially for long-term fans and shareholders. Fat Brands is the first Reg A+ IPO to offer a dividend.
Tripoint and BANQ
The Fat Brands IPO, if completed, will be the second IPO administered on the BANQ platform. BANQ is the online division of Tripoint Global Equities who serves as the Fat Brands IPO underwriter.
Tripoint has carved out a niche for Reg A + IPOs and is capitalizing as a first mover in the space. Additional future IPOs indicated on the platform include Lovesac, Level Brands, Muscle Maker Grill, and iPic Entertainment.
You can learn more about any of these deals and keep an eye out for new ones on the BANQ Current Offerings page.
Clearly, BANQ is an up and coming IPO platform for individual investors. I’ve added the platform to the best online brokers for IPO investing page.
How to Invest in the Fat Brands IPO
The minimum investment amount for this deal is $500. Investing in the Fat Brands IPO will be the same as the Myomo IPO.
You can invest two different ways:
- Invest choosing the “escrow” option and have shares delivered to you or your brokerage
- Open an account with Banq.co to invest
If you invest using the escrow option, you can choose to have shares delivered to your broker electronically, held at the transfer agent, or delivered to your residence as a certificate. You have to fill out information on an online form and then send money to the company’s bank via check or wire.
Initiate your request to invest from the Fat Brands offering page at BANQ.
Click the Invest Now button to get started. Enter some basic information. Then choose to open an account or complete via escrow.
Then you’ll be taken to an online form powered by Jotforms. Enter the number of shares you want to purchase. Continue on to input more basic information, then eligibility certifications.
If you’re going with the escrow option, choose your delivery method. To electronically deliver shares to a broker, you’ll be required to include what’s called the DTC number for your broker. You can find your broker’s number in the list here. The example below uses TD Ameritrade.
Once you’ve completed the forms and submitted your request, you’ll receive an email with instructions on how to fund your purchase.
For electronic share transfers, expect to see the shares in your account within 24 hours of the closing.
I can attest from the Myomo IPO that this process worked fairly smoothly. The Myomo IPO was delayed somewhat, and there was no confirmation that the escrow payment was received aside from the wire confirmation. But all went through and investors were rewarded.
I have not personally opened an account with BANQ but I expect this method is more straightforward than the escrow option. If any readers have opened an account with BANQ, please share your experience in the comments section below.
The closing of this deal is expected on or around October 19th. This date is subject to changes and delays based on demand. But don’t delay funding your investment if you like the deal. As it stands today, you’ll need to reserve your shares and fund your account by October 17th to participate, according to a sales email sent the morning of 10/04/2017.
Depending on demand, share reservations may be fully or partially allocated. No allocation is guaranteed in the Fat Brands IPO. Only request the number of shares you are willing to purchase. In the past, Reg A+ IPO investors have received full allocations, but each deal is unique.
Disclosure: At the time of writing, the author does not own any shares in the companies mentioned in this article.