NEW YORK (CNNMoney) — Shake Shack is no longer just a cult favorite for foodies. It’s now a cult stock too.
The upscale burger joint’s shares surged 135% Friday morning in their debut on the New York Stock Exchange.
Shake Shack priced its initial public offering at $21 a share Thursday evening — above the price range Shake Shack set earlier this week. It opened at $47.21 and quickly shot above $50 a share before pulling back slightly.
The company raised $105 million from the stock sale. And at Friday morning’s price of about $49, Shake Shack is worth $1.74 billion.
Shake Shack is sharing some of the wealth with customers too. To celebrate its first day as a public company, Shake Shack will be offering free breakfast sandwiches and burgers at a food truck outside the NYSE.
Restaurateur Danny Meyer, who is chairman of Shake Shack and founder of the Union Square Hospitality Group that started Shake Shack, owns a 21% stake in the company. His share is now worth nearly $365 million.
Meyer thanked employees and fans in a tweet Thursday night.
“#Gratitude. Team, Guests, Community, Suppliers, and Investors. In that order. Thank you all,” he wrote.
Shake Shack, which started in 2001 as a hot dog cart in New York’s Madison Square Park, has quickly become a Big Apple icon.
Expanding … but not too quickly. The company currently operates just 63 restaurants worldwide — but 16 of them are in the metropolitan New York City area.
Shake Shack has already planted outposts in several global markets, such as London, Moscow, Kuwait, Turkey and the United Arab Emirates.
And the company has said that it wants to expand relatively slowly. It is targeting 10 new locations in the U.S. a year as well as more international locations.
The strategy has been extremely successful so far. Shake Shack reported revenue of $83.8 million in the first three quarters of last year, an increase of more than 40% from the same period in 2013.
Shake Shack is also profitable. But net income fell in the first nine months of 2014, primarily due to higher costs for paper, food and labor as the company opened more locations.
Profiting from the problems at Mickey D’s? Still, Shake Shack appears to be doing well at the expense of McDonald’s. The CEO of McDonald’s announced his retirement this week following another quarter of bleak sales.
Shake Shack bills itself as a “fine casual” dining chain, a play on the fast casual term popularized by Chipotle and Panera.
In addition to having the backing of star chef Meyer, Shake Shack says in its IPO filing that it prides itself on using “sustainable ingredients, such as all-natural, hormone and antibiotic-free beef.”
The proof is in the prices. A typical burger at Shake Shack can cost twice as much as a Big Mac.
Shake Shack also differentiates itself from other burger restaurants by selling hot dogs, beer, wine and — of course — frozen custard shakes.
Investors are clearly hungry for restaurant IPOs.
El Pollo Loco, Potbelly, Noodles and Zoe’s Kitchen have gone public in the past two years and soared on their first day of trading.
There is a lot of competition in the burger wars. But those four stocks are now well off their highs.
So is Habit, a popular California burger chain that went public last November and more than doubled in its debut.
Habit may not be as well-known to New Yorkers as Shake Shack. But its burgers were voted best in America by readers of Consumer Reports last year.
To that end, competition could prove to be the biggest risk for Shake Shack.
Even though its burgers are delicious, so are ones made by privately held Five Guys, Smashburger, Bareburger, In-N-Out and many other regional and national upstarts.
Heck, Sonic is doing really well lately thanks to strong demand for its burgers.
But pricey burgers could wind up being another culinary fad too. Krispy Kreme was a hot IPO when the doughnut chain went public in 2000. But the stock is now trading more than 60% below its all-time high.
Shake Shack has already satisfied the palates of hipster burger gourmands. But now has to deal with the fickle tastes of Wall Street traders and hedge funds too.