Guzman y Gomez Burrito IPO: What We Know

Chipotle now has competition in the burrito market thanks to the initial public offering (IPO) of Guzman y Gomez, a Mexican-themed fast-food chain.

CNBC reported that the company made its debut on the Australian stock exchange on Thursday, June 20, with an impressive start of $22 AUS per share, and an initial valuation of 2.23 billion Australian dollars ($1.49 billion). The shares ended its first day of trading at $30 AUS, marking an increase of 36.36%.

The company’s IPO was first announced in May and had an initial proffer of 11.1 million shares. After its debut, however, the shares were upsized to 15.3 million. Part of the upsizing of shares comes from a commitment by Capital Research Global Investors, who subscribed its shares.

Let’s take a look at what else we know about this dark horse burrito company.

Guzman y Gomez: Not-So-Humble Burrito Origins

According to Bloomberg, Guzman y Gomez was founded by Long Island native Steven Marks, a former hedge fund manager for SAC Capital and Cheyne Capital. Marks, who moved to Australia in the early 2000s, was inspired to open Guzman y Gomez after he’d had a few subpar burritos in his adopted homeland.

“Back then, Mexican food was something to have while you were having a margarita,” he said in an interview with the outlet. “I remember walking into my office one day and telling my business partner, ‘I got the next big idea. We’re gonna reintroduce Mexican food to this country.’”

The first burrito hotspot was opened in 2006 in a small suburb outside of Sydney, Australia. Today, Guzman y Gomez has 185 restaurants in Australia, 17 in Singapore, five in Japan, and four in the United States. The company earned worldwide sales of more than $500 million in 2023.

And Marks said that this is just the beginning for the company. He intends to open 30 to 40 additional locations annually with the goal of eventually having 1,000 locations in Australia — roughly the same amount as McDonald’s.

“I always called GYG fast food. And everyone was like, ‘No, no, you’re fast casual, McDonald’s is fast food,’” Marks said to the outlet. “I said, ‘McDonald’s isn’t food.’”

What’s Next for Guzman y Gomez

According to data collated by Bloomberg, the burrito company upped the size of the initial share sale by about 40% last week, making it the largest offering in Australia in almost a year.

CNBC specified that Guzman y Gomez’s IPO is the biggest in Australia since chemical distributor Redox’s July 2023 offering and the fourth offering over $100 million in the previous two years. For purposes of comparison, Chipotle’s IPO is worth $40 million AUS per store, compared to Guzman y Gomez’s $10.6 million AUS per store.

Guzman y Gomez’s initial public offering was jointly bookrun by Barrenjoey and Morgan Stanley, per CNBC.

When it comes to the company’s valuation, Morningstar Inc. analysts are hesitant to give Guzman y Gomez an “economic moat,” or a competitive edge that keeps competitors at bay. Their assessment of the value of each share is $15 AUS, which is 32% less than what the trendy burrito restaurant is asking for.

Morningstar said that its valuation of the company is based on its losses of $2.3 million AUS last year and its projections of a further $16.2 million AUS loss for 2024 before it sees a profit in 2025.

“We expect Guzman will maintain attractive store economics over the next decade,” analysts led by Johannes Faul wrote in a note on June 7, according to Bloomberg. “However, we need to see firm evidence that the brand and store economics are holding up as the store roll out progresses to award a moat and extend our optimism beyond the next 10 years.”