FAT

FAT Brands ($FAT) Executes $31.2M Share Buyback at 86% Premium to Market Price, Signaling Strong Management Confidence

06/09/2025 12:13

$FAT's stock has plummeted 58% over the past year, but the company's massive share buyback at a significant premium to market price is drawing investor attention. According to SEC filings dated June 4th, FAT Brands Inc purchased approximately 7.14 million shares at $4.37 per share through a subsidiary. This $31.2 million transaction represents an 86% premium to the same day's closing price of $2.35, signaling management's strong conviction that current share prices are severely undervalued. FAT Brands operates a diverse portfolio of restaurant franchise brands including Round Table Pizza, Fatburger, Johnny Rockets, and Fazoli's. With a current market cap of approximately $43.9 million, this small-cap company spans the full spectrum of dining experiences from quick service to casual dining, targeting diverse customer segments through differentiated concepts like Twin Peaks and Hurricane Grill & Wings. This massive buyback continues a pattern of sustained insider purchasing. Director Mark Elenowitz purchased 1,000 shares at $2.20 on May 30th and acquired a total of 9,200 shares throughout August 2024, demonstrating consistent buying conviction. Director Andrew Wiederhorn also purchased 1,000 shares in November 2024, reinforcing management's confidence in the company's prospects. However, the company's financial situation remains challenging. Despite generating $582.7 million in trailing twelve-month revenue, FAT Brands recorded a net loss of $205.6 million, resulting in a negative 33.89% profit margin. First-quarter revenue declined 6.5% year-over-year to $142 million, while adjusted EBITDA fell from $18.2 million to $11.1 million. Despite these financial headwinds, FAT Brands is pursuing an aggressive growth strategy. The company plans to open over 100 new locations in 2025 and has secured commitments for more than 1,000 new unit openings. Recent announcements include expansion into France with 30 Fatburger locations planned over three years and the innovative adoption of Bitcoin for franchisee royalty payments. Management restructuring has also been significant. Taylor Wiederhorn was appointed Co-CEO in late April, joining existing Co-CEO Ken Kuick to lead the company's transformation efforts. This leadership change represents a potential inflection point for the company's strategic direction. **Investors should closely monitor how this new management structure impacts operational performance.** Debt reduction remains a key strategic priority. FAT Brands plans to raise $75-100 million in capital during 2025, with proceeds primarily directed toward debt repayment. Additional initiatives include spinning off Twin Hospitality Group to unlock shareholder value and implementing cost reduction measures targeting over $5 million in annual savings. The broader restaurant industry environment presents both challenges and opportunities. Persistent inflation in wages and food costs continues pressuring margins industry-wide, while evolving consumer dining patterns affect spending behaviors. However, FAT Brands' diversified brand portfolio provides natural hedging against these macroeconomic pressures. Particularly noteworthy is the company's co-branding and tri-branding strategy, which aims to enhance operational efficiency and customer experience by operating multiple brands within single locations. This approach can reduce costs while maximizing revenue per location. International expansion plans offer additional upside potential. Beyond the France initiative, the company is exploring various overseas markets, which could provide significant growth drivers. **Successful global expansion could transform the current undervaluation into an attractive investment opportunity.** Current price-to-sales ratio of 0.07 reflects extremely depressed valuation, indicating the market's deeply pessimistic assessment of the company's financial condition. However, the massive share buyback at substantial premium combined with consistent insider purchasing suggests management maintains strong conviction in long-term recovery and growth prospects. Key factors to monitor include upcoming quarterly earnings releases, debt reduction progress, new store opening performance, and concrete developments in international expansion plans. Operational improvements under the new Co-CEO structure will also be critical variables determining future success.

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