Pie Five Twin MOD Pizza Raises $42m
After yesterday’s close it was reported that MOD Pizza, one of the other largest players in the fast casual pizza space has raised another $42 million to continue expanding its rapidly growing base of stores. While MOD Pizza has grown to almost twice the size of the Pie Five chain, this funding round brings the total raised to approximately $150 million which means that MOD’s valuation may be approaching $200 million, but it is definitively between 8-10X the current Pie Five valuation. This announcement from MOD highlights an eye-popping valuation disparity that has emerged between the two companies with nearly identical concepts/products – MOD received enough cash yesterday to pay 2x the current price for all RAVE shares outstanding and still have $4 million in cash leftover because RAVE Restaurant Group’s stock market valuation was only $19 million as of the opening this morning ($1.92).
While MOD could clearly pay cash to acquire RAVE and more than double its store count in one fell swoop, we do not think that will occur. However, we do believe there are other players who are in the fast casual space who do have the appetite for such a deal and we believe that the ridiculous disconnect that has emerged between RAVE’s enterprise value (no debt so literally $19 million based on current market price) and the value that could be created for shareholders with a rapidly growing 100 unit fast casual pizza chain + a 225 unit pizza buffet chain in the hands of a larger chain or private equity group will increase the pressure on the RAVE Board of Directors to open up the bidding. The RAVE Board of Directors has taken steps to increase communication with shareholders by holding its first quarterly conference call last week, but the company’s largest individual shareholders have asked for more – specifically the formation of a committee and/or the hiring of a firm to solicit offers for Pie Five and Pizza Inn individually and/or for an acquisition of RAVE in its entirety. With its closest comparable now valued north of $150 million, it will be increasingly difficult for RAVE to remain independent unless the stock trades significantly higher.
Entry filed under: fast casual pizza, micro cap, micro cap short squeeze, short squeeze, small cap, Uncategorized. Tags: Blaze Pizza, fast casual pizza, Fast Casual Restaurants, MOD Pizza, Pie Five Pizza, Pieology, RAVE.