Already and this is the Daily This is the Daily ohs oh, now it makes sense.
Good morning and welcome to the Daily OS. It's Friday, the twenty first of June.
I'm Sam, I'm Billy.
In one of the biggest launches of a new company on the Australian Stock Exchange or the AX in years. Thousands of Australians have snapped up shares in Guzmany Gomez, the rapidly expanding Mexican fast food chain. And for anyone who feels like this is a bit of a different language, don't worry. This podcast episode is going to be just for you. The ASX is where Australians are able to buy and sell shares of companies that have decided to be publicly listed instead of privately held. So what does
that actually mean? And perhaps most importantly, will this change the structural integrity of my burrito? On today's podcast, I'll be joined by Maddie Guest. She's the host of finance podcast You're in Good Company, and she's going to help us break this all down quicker than you can polish off at Cassadia. But first, Billy, what is making headlines this morning?
The energy market operator has called an emergency meeting over concerns of a gas shortage in Australia's southeast. It comes after record breaking cold temperatures in parts of the country This week. The Australian Energy Market Operator warned Quote the supply of gas in all or part of the East Coast Gas system might not see New South Wales, the Act, Victoria, South Australia and Tasmania through winter. It has asked Queensland gas producers to quote maximize production.
The Telecommunications Watchdogs says the twenty twenty two Opta cyber attack, which saw millions of customer details leaked, was preventable. The Australian Communications and Media Authority or AKMA, has filed a submission in the Federal Court alleging the leak was due to a quote coding error from September twenty eighteen. AKMA said optors failed to address the issue, leaving them quote
vulnerable to attack. The telco has previously rejected claims it failed to protect customer's personal information and said it would defend itself against akma's legal action.
Australia will send two million dollars in aid to Papua New Guinea as it continues its recovery efforts from last month's deadly land sides. Hundreds of people in a remote village in p Andng's Anger Province were killed in the natural disaster. The federal government funding will go towards restoring a major highway in the region, as well as health services.
And today's good news is just for back pain sufferers. I just literally just felt myself sit up straighter. Australian researchers have found walking three times a week can decrease back pain. Macquarie University's Spinal Pain Research Group led a first of its kind trial with over seven hundred participants over one to three years. It found adults with a history of lower back pain were less likely to experience recurring discomfort if they walked regularly. Maddy Guest from your
in Good Company joining us in the studio this morning. Maddie, so good to have you here.
Thanks for having me Sam.
I wanted to talk to you this morning about Burritos Mexican food, and the reason why is because guzmin N Gomez has just floated on the ASX. It's been listed and it had an incredible day as its first date. It's now worth over three billion dollars. What do we know about this company?
The biggest reason Sam why I love investing is because you get to dig into the stories behind the companies that are on the Stock Exchange. And when we look at fast Food and guzmani Gomez in particular, it is all down to the man behind the business, a founder called Stephen Marx.
So he grew up in New York. He had talks.
About how he had quite a tough, I guess upbringing. He had a drug addict dad, he had a brother who was legally blind, and he worked really hard, got a job in a hedge fund at the age of twenty three, and then at the age of thirty he was burnt out and so he decided to move out to Australia. Not an uncommon story, No, and decided to
move out to Australia. And what was missing when he moved out here It was Mexican food well, and so he started the business with a friend of his, also from the US, who had moved out here with an Ozzie that they had fallen in love with, another classic story. And so they bought out chefs from Mexico and they opened their first restaurant in Newtown in two thousand and six, closely followed by a Bondai junction, and today they have more than one hundred and thirty stores.
And they're looking to have now over one thousand stores. It's really interesting you mentioned that point about them bringing out chefs. There's been sustained criticism of the company since then for not being fully owned by people from Mexico and there being a sense of cultural appropriation in the
way that they present the business. They pushed back and said that there's really strong connections back to Mexico, and the founder, albeit from New York, you know, is proud of the company that he's built, clearly, and now it's gone from being a private company to a public company. Before we get back to the business itself, what does that actually mean.
So when a company is private, it is owned by a small number investors. It might be the founders, it might be high networth individuals, private equity or even large institutional investors. But when a company goes public that means it lists on the stock exchange. So for example, in Australia we have the ASX and that's exactly what Goods Minigomez has done.
So then what would the reasons be for the company to take that step from a privately held company to a public one.
I think the biggest reason would be accessed more capital.
And so when capital you mean money.
Yeah, So when you list on the stock exchange, every day, people are able to buy and sell shares in the company, and as a result, that company is able to raise more money to do more things. And so in this case, a big part of the growth story for guzmni Gomez is expansion. They want to get more stores on the flip side. When a company goes public, they are subject to a lot more regulation, and so they have to report their financials at least half yearly, and I guess
they're going to be under the eyes of investors. So people are going to be asking what is driving their financial performance and if it's not good, why is that?
Just under more pressure?
In general from an actual company perspective, Sure, they get more cash, but does anything actually change about how they run?
When you go public on the stock exchange, it also provides what we call liquidity to the existing investors, and that means that they're able to sell some of their shares and get some money back. And in the case of GUZMANI Gomez, it's super interesting. They actually have investors that were related or connected to the founding group of McDonald's, and so it's a super interesting group of people.
That's a really interesting point about McDonald's obviously a major company, you know, monetarily in world markets. I've actually seen some commentary that Guzman was calling itself the next McDonald's, and now we're using that kind of success story to show investors what was going to be possible. But for consumers in the restaurant, if you're going to go down to your local Guzman tomorrow, does anything change for them now that the company.
Is public look day today, The answer is no.
I think the biggest challenge for GUZMANI Gomez is going to be as they continue to grow at this really rapid rate, are they able to maintain that really sort of tight company culture they've referred to and really taken pride in in the past. You know, I've listened to the CEO and founder talk about how you know, they currently have one hundred and eighty stores. McDonald's has thirty thousand,
and that's what they're trying to go towards. And so I guess you have to ask the question that if they have thirty thousand stores, how are they going to be able to maintain that high quality that they really pride themselves on.
One other thing I've noticed in the reporting on Guzman going on to the AOSX is the word mote and the idea that people were challenging where the Guzman had a strong enough moat. What does that mean?
So an economic moat is a classic Warren Buffett term, a very famous investor, and he always talked about how he liked to indus.
Maybe my ninety three year old hall Puss. He always talks about how you like to invest in businesses with an economic moat.
And basically what that means is if you imagine back in the day, You've got your castle that is surrounded by a moat with you know, alligators and water, and it's protecting from the enemies coming in and attacking the castle. So in this circumstance, what we're talking about is how is GUZMANI Gomez able to protect itself from competitors.
From being copied?
Exactly?
What is stopping another Mexican store starting up and being just as good or better and expanding in the same way that Goosmani Gomez has.
And so it was the undertone here that Gusman doesn't have a good moat.
Yeah, so that's what some analysts are saying. And the other thing that's sort of coming into the commetary around that's related to this is the valuation of Guzmani Gomez And so often when you are investing, you want to look to the direct competitors for Guzmari Gomas. The other publicly listed food companies that are analysts comparing to are Dominos and Colin's Food, which is the sort of parent
company of KFC franchises. Now, Guzmari Gomez is valued significantly higher than both of those companies, and so there's a lot of question around whether maybe there's a little bit of hype.
Have there been any major criticisms or concerns from the investment community as this company has been talked about over the past few months.
So I think we've talked about probably the two biggest and most important, which is do they have a strong economic moat and the valuation. But the other ones that I have been reading about are around supply chain. So we know the inflation continues to be quite high and there are quite a lot of flow on effects to supply chain. Gauzmni Gomez really prides itself on, you know, using free range chicken, the highest quality food, all these great.
Inputs which are low price at a low price.
And yet you have to ask a question that with these sort of more macro econom mcheadwinds, is that going to make it harder for Gouzmighti Gomez to be successful in the short term.
Everything is going up and consumers constantly are looking for something cheaper, and if you position yourself as cheap, it's hard to kind of keep up with that race. So yesterday everyone gets very excited because for the first time ever you can buy shares in Gusman. It floats on the ax by the end of the day, so markets close at four pm. What happened to the share price and what does that tell you about how investors are feeling.
The stock listed on the Stock Exchange at a price of twenty two dollars. People seem to really lack this share It was up over thirty five percent in one day.
It's a great result.
I'm sure everyone involved in the business itself will be very happy.
People like their burritos.
I also think there's an argument to be made for when a really visually appealing and visually familiar brand lists and people just kind of want to be part of it because they've had a burrito once a week for the last couple of years and they want to be part of the journey.
I think that's the interesting thing about investing, right is you can have this business where all of the fundamentals tell you one thing, and by fundamentals I mean financials, how much money is it making, what are the costs involved. On the flip side, if people really like the brand, if people engage with it, then they kind of want to invest in it because they want to benefit financially from the way that they're interacting with it day to day.
And so sometimes we see these circumstances where analysts and finance experts might be saying one thing, you know, the company's only worth this much, it's outrageous that they're value it that high. And then on the flip side, when it does list on the stock exchange, there's so much hype and people love this company so much that they don't care and they invest in it anyway.
So if you want to buy stocks and Guisman now, and we're not giving financial advice, but more just as an idea. If you want to buy stocks and Guisman now, have you missed the boat?
I would say my biggest reflection on IPOs when companies do go public is so often that initial few days, weeks, months is really really turbulent. And so we know that the stock price went up really significantly on day one, and it might keep going up, but it might also go down to and there's this interesting stat that around
eighty percent of IPOs actually lose money. So I think when it comes to investing in businesses like this, when they're in this stage of infancy on the stock exchange, you really have to think about what is your risk tolerance. Because if you love risk and you love tacos, maybe this is a company that you want to do your
research in and invest in. But if you are I guess more risk averse and you want to let it play out a bit, this company is going to be listed for a long time, and so you can sit and wait and let it kind of settle and then invest down the track. Once I guess, the adjustment to what we call public markets settles.
Down really interesting. I can't believe that. You know, there's so much money in good Mexican.
Food, three billion dollars apparently.
Amazing. Thank you so much for joining us on the podcast today, Maddie, and thank you for joining us this week on The Daily Os. Maddie's actually got her own podcast. It's called You're in Good Company, really awesome financial discussions. I'll throw a links to that in today's show notes. We'll be back again on Monday morning. Until then, have a wonderful weekend.
My name is Lily Maddon and I'm a proud Arunda Bungelung Cargoton woman from Gadighl Country.
The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and Torres Strait Island and nations. We pay our respects to the first peoples of these countries, both past and present.