Back on May 11, we published our first post comparing Shake Shack’s (SHAK) post-IPO price action to the action GoPro (GPRO) saw when it IPOd in 2014. Below is the text from that post:
Since its IPO date on January 30th, Shake Shack (SHAK) has skyrocketed higher. The company’s IPO was priced at $21, but it opened for trading on the secondary market at $47. After pulling back slightly over its first two weeks of trading, the stock began a surge that left it up 273% three months after its IPO date. Pretty remarkable.
If you feel like you’ve seen this before, it’s because you have. When GoPro (GPRO) IPOd last June, it took a remarkably similar trajectory higher. While the stock didn’t jump quite as much on its IPO date, it ran up nearly the same amount after three months of trading. At 67 trading days in, SHAK was up 273% from its IPO price. Over the same number of trading days, GPRO was up 278%.
The reason we’re pointing this out is because after the three-month mark for GoPro (GPRO), things took a significant turn lower. Below is a price chart showing the performance of GoPro (GPRO) and Shake Shack (SHAK) from their IPO dates. As shown, since the three-month point for GPRO, the stock has given back all of the gains it made after its first day of trading. Is Shake Shack doomed to follow a similar pattern? There will definitely be more potential for sellers to step in this summer as options trading becomes available and lock-ups expire.
So how does the SHAK vs. GPRO comparison stack up now that SHAK has been trading for another month and change? Below is an updated chart showing the percentage change for the two from their respective IPO dates. As shown, SHAK went on to rally even more than GPRO did before hitting its peak, rallying nearly 350% at its all-time high. Since that peak, however, we’ve seen shares of SHAK fall 30.6% over the last month, and it appears to be settling into the same downtrend that formed for GPRO after its post-IPO peak. If the trend continues, SHAK has a lot further to fall from here over the next several months.
More selling pressures for SHAK are on the horizon. Not only will lock ups begin to expire this summer, but options will also become available at some point, which allows investors to take additional negative bets that simply aren’t available now. For a stock like SHAK that’s nearly impossible to short right now (there aren’t any shares to borrow), options will be attractive for traders that want to bet on lower prices.