Guest Post: Even A Money-Losing Pizza Chain Can Do An IPO

Tyler Durden's picture

Authored by Jonathan Weil, originally posted at Bloomberg View,

Just when it seemed like investors might have lost some of their appetite for initial public offerings of companies that lose money . . . yeah, right.

Papa Murphy's Holdings Inc. priced its IPO today at $11 a share. The stock closed up a nickel. I've grown accustomed to seeing IPOs by profitless technology companies. But this is a pizza chain that had net losses of $606,000 in 2011, $2.1 million in 2012 and $2.6 million in 2013.

Now it has a stock-market value of about $187 million, or about 2.3 times its revenue last year. Founded in 1981, Papa Murphy's, based in Vancouver, Washington, sells uncooked pizzas that customers take home to bake. It had been majority-owned since 2010 by private-equity firm Lee Equity Partners LLC.

I can somewhat understand the appeal of speculating on some unproven Internet company that loses money but promises to change the world. But a 33-year-old pizza chain? Come on. In its registration statement, the company said that it has been "repeatedly rated the #1 pizza chain in the United States by multiple third-party consumer studies." So assuming that's true, why can't it make money?

Oh, but wait. It does make money on an "adjusted Ebitda" basis, which is one of those silly metrics that companies make up when they don't have actual profits to show off. Papa Murphy's said it had $24.4 million of adjusted Ebitda last year, which helpfully excluded such obviously unimportant items as -- their words here, not mine -- "expenses not indicative of future operations," "management fees and related expenses," "transaction costs" and "new store pre-opening expenses."

And of course, this makes soooo much sense. Because as we all know, management fees, transaction costs and new-store expenses aren't the same things as money. And shouldn't we all be blessed with the same power of insight that Papa Murphy has to distinguish between expenses that are indicative of the future and expenses that aren't?

Go ahead, try the pizza. But stay away from the stock.


Nope - No Bubble Here!!!

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Mr. Dew's picture

They've been littering the SiriusXM feed of CNBC with their ads lately.  Right up there with the Viagra knockoff ads, the penny stock spotlight ads, and the "Market Trend Software—a new company!" ads that have been running for a few years now.

XenoFrog's picture

Papa Murphy's pizzas have the same effect on me that Taco Bell does. Eat a meal and then spend the next 6-12 hours shitting out your insides in the bathroom.

booboo's picture

Right, the first hint is in the name, everyone should know that no mick can make a decent pie.

Stackers's picture

We're all Pandora now.

666's picture

P. T. Barnum was right.

AlaricBalth's picture

Stocks aren't bought, they're sold.

knukles's picture

Take the pork out and IPO it in the Middle East as a religious meal provider.
Better yet, enough Campaign Contributions and Mooch'll have it on her approved school meal list a la Reagan's tomatoes are vegetables.
Come to think of it, what else...

Knukies, that's a bad idea tp plant in somebody's head in DC, FFS

Squid-puppets a-go-go's picture

You might lose 95% of your investment, but you get a free garlic bread!

bonin006's picture

Not tomatoes Knukles - they are too natural - not enough money in it for big biz - it was ketchup.

CheapBastard's picture

Who in their right mind would buy a pizza so they can spend on hour cooking it at home [after half hour picking it up!]?

Is this a new fad? People I know buy pizza so they DON'T have to cook.

sleigher's picture

It is supposed to be cheaper this way.  Whatever, their pizza is disgusting.  It might be a neat idea if it were actually cheaper and the pizza was good. 

DaveyJones's picture

they need the dough or their cake is baked 

Tijuana Donkey Show's picture

Uncooked pizzas are eligible for EBT. It's a gateway to EBT $$$

Urban Redneck's picture

When an anonymous poster...

On a fringe blog site...

Can file a shelf registration...

For a cash shell...

And raise 8 figures of equity in an IPO...

Then perhaps we will have reached peak madness, and the crowd will see the light.

XenoFrog's picture

Usually it's highschool kids who may or may not have changed their plastic gloves after using the bathroom.

W.M. Worry's picture

You're supposed to cook it before you eat it.

knukles's picture

As a good minded individual, one of upstanding maturity and character, in the interests of population control, sanitation and ecology, I always reused my condoms as a lad.  Just kept turning it inside out.

Carl Popper's picture

Xeno baby!

Our cute and sexy outspoken token zionist.

I thought you had disappeared.

Suisse's picture

How do we know that XenoFrog's avatar is actually her and not from someone random on facebook? I found her avatar on an inactive facebook account. I could upload a picture of maria bartiromo as my avatar, doesn't mean it's me. 


pods's picture

We have been over this, people can use pics found on the net as an avatar.

Mine's real though.


Yes We Can. But Lets Not.'s picture

Well, uh, let me be, uh, perfectly clear - I, uh, or rather my,  avatar, uh, is, uh real.  As real as, uh, the success of the ACA.  As real as, uh, the birth certificate I, uh, voluntarily provided, prior to, or, rather, uh, after the election.

fxrxexexdxoxmx's picture

My avatars is real and unique. There are many like it but this one is mine. I named it Surely.

Blano's picture

Did you do the same with your women???

therevolutionwas's picture

Go see a doctor.  Something is wrong with you.  The Papa Murphy's I consume are all fresh ingredients.

therevolutionwas's picture

I do fuck but am not a clown.  Thanks just the same retard.

klockwerks's picture

Great product, always cooks up great and good bang for the buck.

ebworthen's picture

It was before they raised their prices 40%.

BeetleBailey's picture

..then the fuckin pie I had must have detoured into a fucking horse barn.

I was suspect of something that spliced and Irish Mic with a Wop entree...right from the start.....

As the fuckin pie baked, it smelled like Smarty Jones took a piss in the oven....

We cautiously removed the stinking pie from the oven....sat there in it's putrid odor....

we then nibbled some toppings from the smoldering diameter of dough with what looked like encrusted shit on it....tasted like the family dog's droppings....

...we even gave the fuckin pie to the dogs after it cooled off....they want no part of it....we then cheered them on to lift a leg on whiz on go....

Papa Fuckin Murphys.


Kirk2NCC1701's picture

Damn straight! The last 4 times we ate their pizzas, all family members had diarrhea.

What do you expect, when you have a revolving door of high school kids running the place? Quality and Hygiene are "Stretch Goals" for them.

"PTD* at 425 degrees" should be their real motto.

* Pizza Transmitted Disease

Agent P's picture

Let me get this straight...every time you eat their pizza, you and your family all get diarreah...and you and your family have eaten there four times now? Is this some sort of a diet plan for you?

G.O.O.D's picture

omg that was fvkin funny!

TruthTalker's picture

after 2 times did you not learn - some people are born stupid - clearly it is genetic

fxrxexexdxoxmx's picture

After the second time why in the heck did you go back?

G.O.O.D's picture

life is hard, it is harder if you are stupid

kchrisc's picture

"House of cards zone: No fans or air-movement devices beyond this point."

Prisoners_dilemna's picture

Hopefully whispering the truth from our little corner of the interwebz will turn into gail force winds.

Carl Popper's picture

Positive feedback loops.


It is possible.

Bangin7GramRocks's picture

Chazz Michael Michaels says "Mind-Bottling, isn't it?"

Dr. Engali's picture

They raised $187 million? That's a lot of dough...... Hey, somebody had to say it.

DeadFred's picture

Very punny. I don't usually risk the curse of the red dreaded red arrows but we had Papa Murphy's a couple days ago for a family event because it is my favorite pizza place. Very decent and very cheap. As far as the valuation of the IPO I'll defer to others but if the company needs an infusion of cash to turn profitable isn't that what the whole stock exchange thing is about. I know it's usually used as an alternative to the blackjack table or as a way for venture caapitalists to cash out but this seems like a legit role for the stock market to play. Of course nobady asked me.

chunga's picture

We're finding it nearly impossible to find decent pizza so we make it ourselves. Papa Gino's used to be good in New England, for a chain, but I have no idea if they have stocks or IPO's.

knukles's picture

Can't find a good pizza anywhere in California, having been spoiled in NYC and Connecticut.
In fact, by and large, CA cooking is rather poor by culinary standards.

chunga's picture

I grew up in RI and there were lots of really good local pizza joints. MA too, especially Fall River. It's been so long I wonder if it's still the same or has it been watered down like most everything else. Everything seems to come out of Cisco bucket these days.