News

Spicy Pickle files for IPO

October 26, 2006

Spicy Pickle soon may become the smallest publicly traded company in the restaurant industry.

The 15-unit fast casual filed with the U.S. Securities and Exchange Commission Thursday. According to its regulatory statement, the Denver-based chain plans to raise $5 million through an initial public offering.

But Spicy Pickle's Tony Walker said the company did not mean for its IPO intentions to be made public.

"It was not supposed to be released," said Walker, a partner in the company. "But people keep track of SEC filings. So it's a good thing. There's no sense of hiding that you're going public, right?"

Ron Paul, president of Technomic, said Spicy Pickle will be going head to head with Panera and other larger fast casuals. "They are a small player in a growing category," Paul said.

Spicy Pickle said proceeds from the offering will be used to "pursue new franchises, build corporate stores, marketing, increase our head count and other general corporate purposes." Spicy Pickle doesn't have an underwriter involved in its IPO. The company is registering 10 million shares at 50 cents a share and 8.24 million shares held by stockholders, also at 50 cents a share.

Spicy Pickle has posted back-to-back net losses the past two years (a net loss of $431,540 last year, compared with a net loss of $287,734 in 2004.) But its store count has more than doubled since 2004.

Walker said Spicy Pickle will open two stores next week, bringing its store count to 17, up from 12 last year. That's decent growth. But can the 8-year-old sandwich chain handle the added pressures of the public market?

"You always have pressures. If you're staying private, the pressures are you have to go out and find private money," Walker said. "There's pros and cons with everything. Right now, we're growing and we feel going public is the right thing to do."

The brand will be traded on the Over-The-Counter Bulletin Board, which is not a part of the Nasdaq Exchange. Other restaurant companies on this board include Ultimate Franchise, New World Restaurant Group and Elephant & Castle Group.

"The truth is, OTCBB stocks are not especially large or stable and are considered very risky," notes Investopedia.com. "As a result, very few OTCBB stocks are successful in making the jump from this market to the Nasdaq or any other major exchange because they are unable to meet the listing requirements."

Spicy Pickle was ranked No. 58 in last year's Fast Casual Mover's and Shakers, and Technomic ranked them No. 80 in its Top 100 Quick Casual Report.