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Friday, October 13, 2006

El Pollo Loco Cancels IPO For Market Conditions: Suspicious

Yesterday we saw something odd. The IPO for El Pollo Loco was withdrawn.

The $135 million IPO was scheduled to go via Bank of America. It isn't unusual that it got shelved or that it was pulled, but the reason is odd: they blamed market conditions.

"Market conditions make it inadvisable to proceed with the offering at this time," the company said in a letter to the Securities and Exchange Commission.

The company claims growth plans won't be affected by the withdrawn offering. While some restaurant stocks are down since their filing in May, blaming this on market conditions is suspect and would lead any skeptic or cynic question this. Maybe something is wrong inside the company or maybe a suit or internal issue came up that wasn't previously known. Then again, maybe the market just isn't right for them.

Since May, PFChangs (PFCB) is down from $45 to $40 and Chipotle Mexican Grill (CMG) is down from highs of $65+ to $56, but there is nothing at all weak about the valuations. Both giant restaurant chain conglomerates Binker (EAT) and Darden (DRI) have rapidly come back to within a few percent of their 52-week highs.

If they need a better stock market I am sort of lost for words as to what to tell them. "El Pollo Loco" means "the crazy chicken," but this feels more like EL JEFFE LOCO.

Jon C. Ogg
October 13, 2006

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