Why did only rich guys get Shake Shack IPO shares?

It’s a systemic injustice in the IPO distribution tradition. The good news: at least some happy Shake Shack employees got some of those hot SHAK shares too.

Shake Shack employees.
Friendly employees and managers at an Upper East Side Shake Shack exhibit a unique fast-casual offering: wine. (Via blogspot azureny.com)

WASHINGTON, February 13, 2015 – We’ve noted early and often in our columns that whenever a truly “hot” IPO gets placed, it’s tough for either you or the Prudent Man to get hold of any shares. Sadly, this leaves only the wealthy to scoop up that coveted initial “pop”—in the case of SHAK shares, a profit in the neighborhood of 150 percent on the first day of trading.

Such as it is, the distribution system for IPOs is unfair to the average investor in our book. We continue to bitch about these guaranteed gifts for the 1 percenters without much hope for recourse from asleep-at-the-switch SEC regulators.

On the bright side, we did learn, during our recent visit to the Tysons Corner Shake Shack, that an unspecified number of actual, everyday working stiff Shake Shack employees were able to get in on the deal, too.

We spoke briefly with three employees at that local Shake Shack, wondering if, in fact, any of them had been able to snare shares in the recent IPO. The answer was a cautious “Yes;” cautious in the Washington D.C. political speech sense, that is. Here, when you ask a simple question to a bureaucrat or politician, you generally get a sideways statement that implies an answer, but not one that violates any internal rules that that would get such a person in trouble or garner bad PR.

In this case, we were able to ascertain from the employees (who shall remain anonymous) that indeed, some employees did get in on the offer. But not all. No one would disclose the requirements, however. Having once back in the day received employee IPO shares ourselves, though, it’s easy to guess how this stock was made available internally.

Generally, if a given company grants (or sells) IPO shares to employees other than the corporate officers and other bigwigs who always get shares—the standard procedure—they don’t grant these shares to just anyone. Normally, an employee has to work at company X for a minimum period of time and/or be on at least a lower level of management.

In other words, employee IPO shares are made allocated by employment longevity, hard work, advancement, or some combination of these elements. Short answer: you have to have worked long enough and well enough at the company to have earned the shares, which is actually a fine incentive.

Again, although we don’t know precisely who among Shake Shack employees got in on the IPO deal, this is our best guess how it was done. But we offer a big, bold hat tip to SHAK founder Danny Meyer and his management team for actually making this happen. It’s still unusual, particularly in today’s winner-take-all edition of late and decaying capitalism which allocates nearly all non-nine-to-five moneymaking opportunities in corporate America to already wealthy elites.

Something that seems to have been forgotten in this century is this: It’s the workers who make a company successful. It’s not all due to the dazzling brilliance of the Pooh-Bahs at the top. Shake Shack seems to have understood this simple truth, and we applaud management’s move to let at least some of their employees in on what was clearly a memorably awesome deal.

Knowing this, it should not come as a surprise that the employees we encountered at the Tysons Shake Shack were energetic, happy, and actually enjoying their work. This might have been one of the reasons why. It’s not something you generally encounter at fast food or fast casual restaurant encounters.

Fast and fast-casual restaurant jobs not the easiest or best-paying jobs in the world, likely at least part of the reason why so many fast-food employees seem glum and lackadaisical when it comes to customer service.

But we saw none of that at our local Shake Shack, which means management must be doing something right.

The only negative we can think of is this: why aren’t more companies bothering to do the same thing?

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  • gseattle

    I like your direction with that, very important.

    One thing … You posited “have to have worked long enough and well enough at the company”. Mehhh, and also be one of the cool kids I suspect. As types who ruffle feathers by pointing out what needs fixing to improve things overall for everyone, I’m guessing our kind aren’t on the you-are-cool-so-here-are-some-options short list. The haves need to pivot their thinking.