Muscle Maker sets terms for its IPO

The struggling healthy fast-casual franchise wants to raise as much as $7 million at $5 to $7 per share.
Photograph courtesy of Muscle Maker Grill

Muscle Maker Grill isn’t asking for a lot in its upcoming IPO.

The fast-casual chain, struggling with weak sales and steep financial losses, expects to sell 1 million shares of its stock for between $5 and $7 per share, according to new federal securities filings.

At its mid-range, the company would raise $6 million, a remarkably small amount for a traditional offering.

If successful, it would give the company a market value of about $42 million.

The company wants to trade on the Nasdaq Stock Market under the ticker symbol GRIL. Alexander Capital is managing the offering.

The offering itself is unusual, given that just two years ago the company tried, and failed, to generate interest in a Regulation A+ mini IPO—it raised less than $150,000 after initially saying it wanted to raise $20 million.

Like that offering, this one comes with big question marks. The company is shrinking, with the number of locations declining to 39 from 53 two years ago. It has plans for aggressive growth but has also acknowledged in filings that it needs to adjust its cost structure as it anticipates a lot of sales from delivery.

Same-store sales declined 8% last year and are down 12% year to date. The company also removed projections of 2% growth next year that had been in a previous version of its IPO documents.

Muscle Maker has also struggled with years of financial losses, and its filings feature a “going concern” warning because its auditors worry about its ability to continue operating.

“Muscle Maker's situation is dire: the company has had persistent negative cash flow and major debt obligations looming in 2020. The auditor's going concern warning is spot on: it is very difficult to see how the operations can turn around and generate the cash needed,” said Nick Mazing, head of research for financial services site Sentieo.

Muscle Maker last week said it has converted $9.5 million in debt held by various lenders into 28.4 million shares, which amount to about 71% of the company’s shares. It also authorized a 1-for-7 reverse stock split in connection with the offering.

UPDATE: This story has been updated to add sales figures.

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