Activist investor Engaged Capital has taken a stake in Shake Shack Inc. and plans to push for board changes at the burger chain, according to a person familiar with the matter.
(Bloomberg) — Activist investor Engaged Capital has taken a stake in Shake Shack Inc. and plans to push for board changes at the burger chain, according to a person familiar with the matter.
Engaged, with a stake of about 6.6% in the company, plans to run a proxy fight seeking three board seats, said the person, who asked to not be identified because the matter isn’t public. Engaged sent a letter to the company’s board in March detailing the proposal for new directors as well as other changes to help boost its stock price, the person said.
A representative for Engaged declined to comment. Shake Shack said in a statement “we are executing our strategic plan and making substantial operational and financial progress,” but did not comment directly on Engaged’s plans.
Shake Shack fell 1.9% to close at $65.21 in New York trading Friday, giving the company a market value of about $2.8 billion.
Shake Shack, which started as a kiosk in a Manhattan park about 20 years ago, was a Wall Street darling for a spell after going public in 2015. Investors banked that its cult following in the New York City area and cache with young people would translate into explosive growth as it opened stores around the world. It also had the allure of celebrity restaurateur Danny Meyer, its founder.
But the stock cooled as lukewarm sales growth failed to justify its lofty valuation. It had an especially hard time during the Covid-19 pandemic, as a lot of its stores are located in urban areas that lack drive-thrus and rely on traffic from office workers.
While sales have been recovering at its 430 stores in the US and abroad, it’s still grappling with reduced traffic, events and tourism, according to Bloomberg Intelligence.
Engaged, based in Newport Beach, California, has a history of agitating for changes including a sale or management overhauls at company’s it targets. That includes food chain Del Frisco’s Restaurant Group Inc., which Catterton Partners later bought.
The Wall Street Journal first reported that Engaged had taken a stake in Shake Shack.
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