The Billion Dollar Burger
On new issue day for a big name IPO, our desk was always howling. Shake Shack had just gone public on the Nasdaq at a time that was real juicy for IPOs as they were getting irresponsibly oversubscribed. An oversubscribed security offering occurs when the demand for an IPO exceeds the total number of shares issued by the underlying company (a great sign if your going public). Companies were getting announced pricings of $15-18 and commonly opening up in the $30’s. Today was no different with Shake Shack which priced at $21 and opened up 123% higher at $47.
“Did this thing really open up at 47 bucks?!” Chad shouts
Mike yells back “BIG BOYS COMING IN!!”
Sounds of a keyboard smashing into a million pieces
Ben leans over and whispers “Sounds like Jack didn't get filled on his uptick”
I give a quick subconscious nod however I'm too focused on the level 2 watching this buyer soak up a fuck ton of stock. Which means we just spotted the buyers.
“Got some off that $48 buyer, he goes I go!” Wrench says with confidence (guy takes a shit in a 3 piece suit, however his call outs were on point, mental note taken, $48 out)
When you’re at a big trading desk, with everyone in the zone, the communication going on -- reading the tape & spotting information that could only be obtained in a millisecond -- is nothing short of poetry in motion. We were slinging hundreds of thousands of dollars back & forth without a second to process the executions.
“BIG POP, TAKING A TON OFF INTO THIS MOVE” Beast shouts
“Got some under 49 half…..Got it!” Mike exclaims, taking his hand off his keyboard for a millisecond to pump his fist
(Referring to selling some of their position a minute or two later)
A brief pause and you hear, “GOT SOME IN FRONT OF 50 -- this thing is FUCKING CRAZY. I’m at 22’s and 72’s all the way up.”
(Meaning he had stock to sell at $50.22, $50.72, 51.22, $51.72, $52.22, $52.72 etc.)
SHAK ran all the way to $52.50 in the next 4 minutes and abruptly turned around.
“YOU SEE THAT SELLER REFRESH THE HALF AND MARKET A MILLION MORE?!” I scream as if I’m getting robbed.
Seconds earlier, I spotted a huge seller on the tape, who in about 2 seconds flat caused the stock to promptly run into a wall at $52.50 and drop quicker than a drunk on a mountain bike. He soaked up about 2 million shares at $52.50 and just let people buy as much stock as they wanted into him. Once the buying subsided, he hit a market order for another million shares, causing the stock to begin to flush dramatically.
“OH BOY SHE'S COMING BACK HARD 52…..51…..50…..49...holy fucking shit” Jack said with little confidence after missing his uptick minutes ago and was now chasing.
If you didn’t take any profit into that first move, you had a pit in your stomach the size of a grapefruit. Only 1 trader on our man desk fell victim to this rookie mistake. Great swing trader, awful IPO trader. Gotta know your strengths.
“Our boys are still there at $48”
“Scooped off ‘em again”
“Taking some off above $49”
“49 HALF there’s a WALL.”
“Looks like our boy at $52’s just stepped down, god only knows what he’s got to sell”
We talk about these big sellers like their individuals that we know. However, this couldn’t be further from the case. These could be huge mutual funds, hedge funds, or banks unwinding their pre IPO allocations. After all, they were up well over 100% from their $21 IPO price, what did they care if they sold at $52 or $49? They were still making a single day fucking killing. While we scalped over the sprinkles on the sundae.
For the next 45 minutes we played the range between $48 and $49.50, trading around a core & buying some near support & selling into resistance (while holding onto our core position in case the seller finally breaks). But around 12:15, the seller won the battle and $48 broke to the downside. We were done with it.
Our desk just made about 40k between us, that’s including the one guy, Fred, who only made a few hundred bucks because he didn’t sell any stock into that first pop. Imagine the mental pretzel he was in when all the boys were so pumped. To make matters worse he was wearing his Trinity College t-shirt, where he and Shake Shack CEO Danny Meyer shared an alma mater.
We decided we’d walk over to the Shake Shack by World Trade Center and pay the day’s winnings forward. I couldn’t be more pumped to sink my teeth into a Shack Stack. It was a cheese burger with a fried onion stuffed with Muenster cheese -- insanity.
We walk over from our Wall St office arriving at about 1 pm to a massive line around the corner. We wait it out, finally make our order and wait another 20 minutes for food. Well worth the wait as I polished off 2 Shack Stack’s. I looked over and saw Ben balls deep in some crinkle cut fries. Today the boys were EATIN’.
We look over and see lights & news cameras. I couldn’t believe it. Danny Meyer, CEO of Shake Shack, was standing there getting interviewed by CNBC. The overwhelmingly attractive news anchor was laughing along, pretending to eat a burger. The second the interview was over, Fred, still in his Trinity t-shirt, decided it was time to make up for the day’s poor performance on the desk.
“Hey Danny --- GO BANTAMS!!” Fred screamed pointing to his t-shirt.
Danny heard this and flashed a quick smile before walking over. “How’s it going boys, enjoying the burgers?”
“Moreso enjoying the stock! Appreciate the pop today Danny, paid for lunch a few times over.”
We chatted for a few minutes and he told us when he had started Shake Shack 11 years earlier, he never conceived in his wildest dreams the type of growth they achieved. We asked him what the key driver to his success was. He then said something I’ll never forget.
“When faced with countless obstacles and failure seems certain, you must never lose sight of what is stopping you from obtaining your goals. You have to be realistic about the problems you face and conquer them head on. You must also never lose faith these obstacles will slow down your progress from the bigger picture.”
Who knew this restauranteur from Wisconsin would make the perfect life coach.
“Danny -- last question. We did pretty well today, added a few thousand to the accounts. But I gotta ask, what’s it like to add a B to your name?!” Referring to Meyer becoming an on-paper Billionaire with the stock soaring.
He looked me dead in the eye and with a cheeky smile said as he walked away,
“.....And to think, it all started from a hot dog stand.”