Tag Archives: BFI



It should be no surprise to anyone that SPACs, or “blank check” companies, have become very popular. About $80B was raised in 2020 for use by these investment vehicles, and just about the same amount in only two months this year.

There are five SPACs, formed by Sponsors that have a background in the restaurant industry, in total raising about $1B, which can support a cool $5B or more in acquisition activity.  BurgerFi has been brought public, FAST Acquisition Corp (FST) is working to merge with  Tilman Fertitta’s hospitality empire, Tastemaker  (TMKRU) and Union Square Hospitality (HUGSU) have raised  funds and are conducting their search. Cliff Hudson (ex-CEO of Sonic) is planning a $125M offering.


We’ve written before how Sponsors can make anywhere from 10x to 50x their investment over perhaps five years (hopefully less) with minimal risk if the SPAC funds are raised and if they have reasonable success managing the Business Combination (BC).

Public investors, typically at $10/unit, which consists of a share and some portion of a warrant, have an apparent “no lose” proposition because they can redeem their share for approximately $10 if they don’t approve of the BC. The Sponsor is given up to 24 months to complete a BC. Investors feel, therefore that they can “always” get their money back and they have substantial upside in the meantime because the SPAC Units often trade at a substantial premium to the $10 offering price well before the BC is completed. Before the BC comes to a vote, therefore, and redemption becomes an active  option, the SPAC investor has the opportunity to sell their shares into the marketplace, hopefully at a premium to the $10 issue price, and the warrant can be retained  as well.


We’ve said “always” and investors in may feel “always” because nobody in a bull market worries about  technicalities, but that does not mean “any time”. The redemption right is only effective at the time of the shareholder vote, 24 months down the road. Between now and then, the SPAC Unit trades like a closed end fund, at a premium or a discount to the issue price. While it is true that most SPACs are currently trading at a premium to the $10 issue price, there is something like $100 billion worth of SPACs that have not formally proposed their BC and therefore could trade at a discount rather than the premium most prevalent today. When we consider that, with the hundreds of billions of dollars chasing deals, at least $5B (with leverage) in the restaurant industry  alone, lots of SPAC Sponsors will propose an obviously high price to complete a deal before time runs out. If the marketplace doesn’t like the appearance of the proposal, the SPAC shares could quickly go to a discount and investors would have to wait for the formal vote before redemption could be requested.

We can provide a couple of examples of this phenomenon.


Fifteen years ago, prior to the ’08 –’09 financial crisis, a popular investment vehicle, Auction Rate Securities (ARS), became popular. Something like $200 billion of these securities were sold by underwriters, whereby investors could get a higher yield than was possible in money market funds. The ARS were invested in a variety of fixed income securities, including money market funds (who were guaranteeing $1.00/share) and a variety of other fixed income investments. There was an “auction” of each ARS portfolio every 7 to 35 days, whereby a new interest rate would be fixed. The underwriters “guaranteed” that an investor could “always” sell their ARS shares at $1.00/share, largely based on the fact that the ARS included (but was not limited to) money market funds.

In Feb’08, money market funds allowed their shares to “break the buck” because their portfolios were not liquid enough to meet redemptions, and the ARS market froze as well. Investors (including this writer) had their funds literally frozen, not redeemable at any price. There was an obscure technicality, under certain conditions, that allowed the ARS Sponsors to do this. As it turned out, the US Government guaranteed the hundreds of billions that had been invested in money market funds, which allowed the ARS Sponsors to redeem those shares, close to par value, as well. This process took about eighteen months. No harm, no foul, but it took a while.


More recently, on December 22nd, we wrote about the Grayscale Bitcoin Trust (GBTC, a closed end fund owning Bitcoin). GBTC was, on 12/22/20, trading at a 40% premium to the Bitcoins that were held. GBTC today trades at a 12% discount. Bitcoin has gone from $22.3k to $48.2K (up 116%) and GBTC has gone from about $30/share to $41/share (up only 28%). Investors obviously haven’t participated anywhere as much as they anticipated in the Bitcoin “play”.


A prospectus for a SPAC  typically runs 200 pages, and contains a great deal of legal jargon. Just as was the case with Auction Rate Securities fifteen years ago, there could be some basis by which redemption might not be as easy as it seems. (It’s always easier to get someone to take your money than to get it back.) Setting that possibility aside: redemption of shares, anticipated in the prospectus to be close to the $10 issuance price of the Unit, is typically offered along with the shareholder right to approve the proposed Business Combination.

Between now and then, however, the investor funds are “at risk”. They can sell at a premium to the $10 redemption price (which has so far most often been the case), but discounts are possible as well. Investors in SPACs should not risk any funds that cannot stay in place until the Business Combination is proposed and the redemption provision becomes effective.

Roger Lipton




Julio Ramirez – CEO

Prior to the business combination, OPES named Julio Ramirez Chief Executive Officer.

During his three decades at Burger King, which he left in 2011, Ramirez served as president of the Latin America/Mexico/Caribbean division, Senior Executive of Franchise Operations and Development in North America, and Executive Vice President/Chief Operations Officer.

As described in BFI’s summary of his qualifications, he is “highly regarded for his ability to build franchise relationships, having led Burger King’s field marketing across North America throughout the mid-1990s as part of Burger King’s successful “Back to Basics” campaign, which attained positive comparable sales for several years. In the early 2000s, he effectively managed over 1,100 franchisees in North American operations and led several key working committees, including franchise relations, operations technology and restaurant finance. He introduced the Burger King brand in over 10 countries throughout Latin America, effectively establishing the supply chain, selecting outstanding franchisees, and building a team that opened more restaurants than McDonald’s in 16 of 25 countries. In Brazil, for example, he developed a local team that assembled an effective supply source, signed ten franchisees in a regional network, opened an office in Sao Paulo and successfully launched the brand with an impactful marketing campaign—all of which resulted in Burger King’s first 60 Brazilian locations yielding annual sales substantially greater than the US average, in the face of tough local competition. In Mexico, he built a team that surpassed both MCD’s and KFC’s unit development, opening over 400 restaurants throughout the country.“

After three decades at Burger King (which is described below), in 2011 Ramirez founded JEM Global, Inc., a company that specializes in assisting quick-service and fast-casual brands with franchising and development efforts domestically and internationally. Ramirez consulted Dunkin’ Brands on its Brazil entry strategy and Buffalo Wings & Rings on its Mexico development strategy. He set up four new franchise groups in Mexico and Colombia for “100 Montaditos,” a Madrid-based Andalusian restaurant expanding into the Americas. He was also co-owner of Giardino Gourmet Salads, South Florida’s premier fast-casual concept, helping to grow the brand in Miami, Fort Lauderdale and Naples, Florida.

Jim Esposito – COO

Just yesterday, BFI announced the addition of Jim Esposito as chief operating officer, succeeding Nick Raucci who has left the company. In summary, Esposito has worked with Planet Fitness, Panera Bread, Papa Gino’s and Burger King.

Most recently, since 2016, he was Senior VP, in charge of corporate club locations at Planet Fitness. Prior to that, he spent a year at Panera Bread, working with a cross-functional team developing key initiatives. Prior to that he served as chief operating officer at Papa Gino’s and D’Angelo, and spent 11 years in a variety of operations positions with Burger King Corporation, including leading Burger King’s Global Restaurant Systems group.

We don’t know the exact years that Esposito was with Burger King, but it seems likely that he worked, in the overseas effort, there with new CEO, Ramirez, and that would speak well for their ability to get the job done at BurgerFi.

OUR VIEW of the management situation

We know neither of the gentlemen, and have no reason to question their credentials. We have a couple of natural concerns, however. First, BurgerFi is an earlier stage publicly held company than their experience has included so they have the typical challenge of matching investors’ short term requirements while not sacrificing longer term considerations. Secondly, a great deal of their time has been spent overseas. While expansion abroad is obviously an important long term opportunity, the priority at this point is expansion closer to home. On the positive side, it ought to be a lot easier to choose locations and supervise operations up and down I95, especially with the brand awareness in Florida, than all over the globe.


We have written about BurgerFi  (and the IPO/SPAC process) a number of times over the last six months and readers can access those articles using the SEARCH function on our Home Page.

BFI stock has moved up to the $15 level recently, no doubt because the Company has announced the 30% surge in new openings expected in 2021, the continued sequential improvement in same store sales, the management additions, and the ongoing marketplace love affair with SPAC business combinations.

As we have described in our previous reporting, the valuation of BFI, based on the currently outstanding 17.6M shares, and subtracting the $39 million of cash on the most recently reported balance sheet is about $217M. This is obviously a very high valuation for a Company with minimal historical EBITDA and big plans. More specifically, Adjusted EBITDA was $3.3M in ’19, projected to be $4.3M in ’20 (not going to happen, IMO, but not relevant at this point), projected in the last Investor Presentation to be $10.5M in’21. With the pandemic dragging on into ’21, we view it doubtful that $10.5M will be done this year, but, once again, investors don’t mind as long as it is going to happen at some point soon. Whenever the $10.5M of EBITDA develops, the $217M of current Enterprise Value seems to adequately value this emerging brand.

In terms of stock performance from here, investors should be aware that, with 17.6M shares outstanding and a current public float of about 6M shares, 27M more shares are in the process of being registered for sale, which includes founders’ shares and shares to be issued from exercise of private placement warrants. The warrants will bring in cash at $11.50 per share so we are not especially concerned about that dilution of the Enterprise Value. However, relative to supply and demand for the public shares, 27M newly registered shares is over four times the current float.

Most important of all, substantial dilution of current shareholders will occur from the contingent shares that will be issued to the original BFI shareholders when the stock hits $19, $22, and $25, and that is not very much higher than the current $15 price level. These  are not “earnout” shares because they have nothing to do with sales or earnings or cash flow, and the stock price might do amazing things, regardless of fundamentals. There are a total of 9.4M contingent shares potentially to be issued, obviously very substantial.


The possibility exists that the stock, in this speculative environment, could go above $25/share and there would be an additional $240M of Enterprise Value issued with no concurrent increase in current or future EBITDA. An optimist would suggest the possibility that operating results could improve substantially, perhaps exceed the $10.5M projected near term EBITDA by a lot. However, above $25/share with well over 25M shares to be outstanding in total, the expanded Enterprise Value would be approaching $700M. Investors would therefore need $35M to support a hefty 20x EBITDA multiple. That is…a long way from the current situation.

Roger Lipton