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Muscle Maker Grill tries populist debut


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Bob Morgan, CEO of Muscle Maker Grill, is trying a mini-IPO and is using posters like the one above to promote the initial public offering to customers, employees and other members of the masses.

T-shirts, signs and pop-up ads to promote an initial public offering? Muscle Maker Grill is using those populist tools and others to promote its initial public offering under a new option known as Reg A+ or a mini-IPO.

To Bob Morgan, CEO of the Houston-based franchised restaurant chain seeking just under $20 million, the mini-IPO is a boon for the individual. “Everybody’s desire has always been, man, I wish I could get in on that IPO before everybody else does.”

Regulation A+, passed as part of the JOBS Act in 2016, allows any qualified investor to buy shares in an IPO, in the past something that was effectively reserved for institutions and high-rolling insiders.

Also in the past is the prescribed “quiet period” that company executives were required to observe—Reg A+ allows direct communication with prospective investors via email, social media, billboards and more, things that a standard IPO prohibits.

“When this came to our attention, it seemed like ...this is going to be perfect for us,” Morgan says, adding Muscle Maker’s majority investor since 2015, private equity firm ARHI in California, brought the option to his attention and also provided $5 million in investment to get the firm ready to go public.

They’ve made T-shirts that say “owner” on the back and show a picture of a Muscle Maker share on the front, and hung posters in the stores that tell customers they’re going public. “So the transparency is fantastic,” Morgan says, adding they’re also giving stock grants to employees.

“We want all of our employees to be an owner,” he says. “To me, that’s the future of being a public company … when you have 10,000 public shareholders pulling your way,” he thinks it’s more powerful than “having an institutional investor in New York City”—although he’s certainly not opposed to the latter, either, he hastens to say.

In November, Muscle Maker’s offering was still in the “testing waters” phase, in which they had filed documents with the Securities & Exchange Commission and awaited questions and comments. In mid-December, Muscle Maker said it received approval to move forward with shares listed on the New York Stock Exchange. It planned to offer 4.2 million shares at $4.75 per share, with an expected close of January 10.

Bob Morgan

Bob Morgan, CEO of Muscle Maker Grill

TriPoint Global Equities, working with its online division BANQ, will act as the lead managing selling agent for the offering. BANQ is the brainchild of Mark Elenowitz, CEO of TriPoint, who began studying Reg A and A+ arising out of the JOBS Act in April 2016, and fashioned BANQ, the electronic investment-banking platform, in part to enable alternative investments like Reg A+.

Reg A “is bringing back the small-cap IPO,” Elenowitz told Franchise Times. “It’s nothing other than a standard underwriting process. If you’re doing a $50 million deal or less, there’s no reason to do a standard deal again.”

FAT Brands, the parent of Fatburger, is the first franchised brand to try for a mini-IPO under Reg A+, also as a client of BANQ. Andy Wiederhorn, CEO of FAT Brands, said he started down the road to do a traditional IPO but then changed to a Reg A+, for a $20 million equity deal with $30 million in debt.

Of course, not everyone is a fan of small-cap IPOs, in which investors could just as easily lose their shirts as hit it big, and because they are smaller, retail investors such a bad bet could torpedo their financial health.

“It’s like everything else, of course there is risk,” says Muscle Maker’s Morgan, but he encourages investors to do their due diligence. “I’d say, look at something that’s on the rise. Then look at the numbers, a 12.44 percent increase” in sales in the third quarter, among other positives.

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