Activist investor Engaged Capital plans to pursue a proxy war with Shake Shack (NYSE:SHAK), seeking three board seats at the high-end burger chain, as per the Wall Street Journal. Including swaps, Engaged holds a 6.6% stake in the company.
Engaged has reportedly been in discussions with Shake Shack’s management for over six months. In March, Engaged proposed new directors and other changes to drive the company’s stock price. SHAK shares have rallied 57% so far this year but are still down over 50% from the highs seen in early 2021.
Engaged is nominating three directors to Shake Shake’s board, one of whom is restaurant-industry veteran and former CEO of Noodles & Co. Kevin Reddy. The activist investor has also suggested Shake Shack to engage a consulting firm to improve its operating efficiency and change its supervoting share structure. Supervoting shareholders have significant voting power over other shareholders.
Engaged also wants Shake Shack to change its staggered board structure. Glenn Welling, Engaged’s founder and chief investment officer, said in the letter to the board that the company needs to make major adjustments to its real estate strategy, store design, labor planning, and supply chain to ensure that it achieves its full growth potential.
Shake Shack recently reported upbeat revenue and a narrower-than-expected loss for the first quarter of Fiscal 2023, ended March 29, 2023.
Is Shake Shack a Good Stock to Buy?
Wall Street is sidelined on Shake Shack stock, with a Hold consensus rating based on three Buys, nine Holds, and two Sells. The average price target of $62 suggests a possible downside of about 5% from current levels.
