This morning, I heard from a source I respect that Jack in the Box, Inc (JACK) is about to make public steps to "unlock" the value of its Qdoba restaurant chain. According to my source, the management at JACK is under a great deal of pressure to squeeze the value out of their Mexican restaurant. Qdoba is about half the size of Chipotle Mexican Grill (CMG), but the market cap for CMG is over 7 billion dollars while the market cap for all of JACK is just over $1.2 billion. The Chipotle restaurants are all company owned, while about half of the JACK locations are franchises, but that does not come even close to accounting for the disparity. Indeed, the value of the Jack in the Box locations alone should come close to the market cap of the entire company. Obviously, CMG is much more profitable than JACK, but again, the disparity in value is much greater than the profit differential should cause. In truth, right now the Qdoba chain is contributing next to nothing to the value of JACK.
The speculation about how the management will unlock the value ranges from a sale of Qdoba to an IPO for a part of the chain or even to a spin off of the chain to shareholders. According to my source, the recent activity in JACK stock consists in part of people taking positions before the moves with Qdoba are made.
Like many stock market rumors, this one may lack substance, although considering the source, I think that this one probably has merit.
Disclosure: I am long JACK stock and also have option positions in the stock.
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