Did Wall Street Get Shake Shack's Secondary Offering Wrong?

Shake Shack’s (NYSE:SHAK) stock dropped sharply in after hours trading Monday, following the announcement that the company was planning a secondary offering of shares. Apparently, Wall Street is concerned that the new offering is dilutive to shareholder value, as it increases the number of shares floated in the market. But these concerns may be overblown. For two reasons. First, the planned offering comes on the eve of the expiration of the company’s post-IPO lock up period, and should be expected. Second, Shake Shack’s stock is already trading close to 40% below its all time highs. Nonetheless, there are more fundamental problems with Shake Shack’s stock, in our opinion. First, there is a great deal of competition from Chipotle, Bareburger, Five Guys Burgers, and the like, which offer customized menus with high quality ingredients, side by side with traditional chains. McDonald’s, Restaurant Brands, And Shake Shack’s Financials