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Sandro Rosell
FC Barcelona President
Tuesday, October 17, 2017

Shake Shack is apparently popular, not only among those who enjoy the hamburgers, fries, shakes, and variety of other items on the menu, but among those looking to make quick money on Wall Street. The dining establishment is finding itself targeted by “short sellers” on the open market, which is making Shake Shack look bad to potential investors.  To be fair, the company has been experiencing financial difficulties, which is attracting the aforementioned “bears” from the market.

Shake Shack was founded in 2004 by Danny Meyer, a restaurateur, as a hamburger stand in Madison Square known for being without any bells and whistles that one may find at other such eating establishments.  It went public to investors in 2015.  And, for the last two years has been struggling financially. Investor expectations have not been met to the extent that they would like them to be.  The stock initially increased to and was worth up to $93 a share in the post Initial Public Offering phase, but has decreased in value to $34.50 a share. While a new chief financial officer was hired to work at Shake Shack in May of this year; Evan Guillemin, a board member in charge of the compensation committee and who also served on its audit committee, resigned. Despite his leaving the company on the very day of Shake Shack’s annual stockholder meeting, the company has stated there were no disputes that led to his departure.  

The issue with the Shack Shake’s stocks being worth less per share is that “short sellers” have been swarming all over the stock looking to make fast money. While Shake Shack has been dealing with shrinking profit margins due to increased prices for labor and store openings, the New York Stock Exchange has been reporting that more than half of all Shake Shack shares on the market have been borrowed from other brokers and already sold off.  Stock shares of this type are only sold off this quickly on the market, or “shorted,” when it is expected they will continue to decrease in value. It is hoped by the “bears” on the market selling the shares that the prices will continue to fall and investors may buy back the shares at lowered prices.  This “short interest” is sending a message that investors only expect Shake Shake shares to be worth less and less in the future.

The only potential good news for the burger company is that the stock may become valuable again if investors can be convinced that the company’s shares will gain value in the future. If the “bears” start to believe that Shake Shack is becoming profitable again, they will leave the stock alone, and only long term investors will show interest.

By: Anat Ghelber