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Guzman Y Gomez Shares Surge 36% in Australia’s Biggest IPO of the Year

Guzman Y Gomez (GYG), the popular Mexican food chain, made a remarkable debut on the Australian stock exchange, marking the country’s most successful initial public offering (IPO) of the year. The company’s shares surged by 36% on their first day of trading, starting at A$29.90 compared to their A$22 issue price. This strong performance, amidst a flat overall market, underscored positive investor sentiment and positioned GYG as a standout in recent IPO history.

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According to Dealogic, GYG’s first-day gain ranks as the largest for a major Australian firm since 2021 and stands as the third-best performing IPO in Australia over the past five years. The IPO involved A$335.1 million ($224 million) worth of new stock, representing approximately one-sixth of the company and boosting its market capitalisation to about A$3 billion, up from A$2.2 billion prior to trading.

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Despite projecting a second consecutive net loss for 2024, GYG anticipates profitability in 2025 and has outlined an ambitious plan to match McDonald’s current store count in Australia over the next two decades. The IPO itself was primarily directed towards existing financiers and franchise owners, contributing to the significant market enthusiasm witnessed on Thursday.

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The surge in GYG’s share price offers a hopeful signal amid broader economic challenges, including high interest rates and inflation, which have tempered market demand since 2022. Australian IPO activity has been subdued in 2024, with only A$98 million raised so far, marking one of the slowest June halves in over a decade according to LSEG data.

Campbell Welch, an adviser at Novus Capital, noted, “It proves the adage that you can list a good company even in a bad market,” reflecting on GYG’s successful IPO despite challenging economic conditions. However, concerns remain about the company’s valuation and the execution risks associated with its aggressive expansion strategy.

GYG, known for its rapid growth in the fast-food market, aims to continue expanding its footprint both domestically and internationally, leveraging its established presence in countries like Japan, Singapore, and the United States. Founder and co-CEO Steven Marks emphasized the company’s commitment to operational focus and growth strategy following its listing.

Despite varying analyst views on GYG’s valuation and competitive position, investors like Sebastian Evans from NAOS Asset Management see potential in the company’s growth narrative and its familiarity with Australian consumers. Evans highlighted the execution risks associated with GYG’s ambitious store rollout plans but expressed ongoing interest in monitoring the business’s performance.

As GYG begins its journey as a publicly traded company, its ability to navigate market expectations and deliver on its strategic goals will be closely watched, shaping perceptions of its long-term viability and market position in the competitive fast-food sector.

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