Speaker 1: Already and this is the Daily This is the Daily
Speaker 1: ohs oh, now it makes sense.
Speaker 2: Good morning and welcome to the Daily OS. It's Friday,
Speaker 2: the twenty first of June.
Speaker 3: I'm Sam, I'm Billy.
Speaker 2: In one of the biggest launches of a new company
Speaker 2: on the Australian Stock Exchange or the AX in years.
Speaker 2: Thousands of Australians have snapped up shares in Guzmany Gomez,
Speaker 2: the rapidly expanding Mexican fast food chain. And for anyone
Speaker 2: who feels like this is a bit of a different language,
Speaker 2: don't worry. This podcast episode is going to be just
Speaker 2: for you. The ASX is where Australians are able to
Speaker 2: buy and sell shares of companies that have decided to
Speaker 2: be publicly listed instead of privately held. So what does
Speaker 2: that actually mean? And perhaps most importantly, will this change
Speaker 2: the structural integrity of my burrito? On today's podcast, I'll
Speaker 2: be joined by Maddie Guest. She's the host of finance
Speaker 2: podcast You're in Good Company, and she's going to help
Speaker 2: us break this all down quicker than you can polish
Speaker 2: off at Cassadia. But first, Billy, what is making headlines
Speaker 2: this morning?
Speaker 1: The energy market operator has called an emergency meeting over
Speaker 1: concerns of a gas shortage in Australia's southeast. It comes
Speaker 1: after record breaking cold temperatures in parts of the country
Speaker 1: This week. The Australian Energy Market Operator warned Quote the
Speaker 1: supply of gas in all or part of the East
Speaker 1: Coast Gas system might not see New South Wales, the Act, Victoria,
Speaker 1: South Australia and Tasmania through winter. It has asked Queensland
Speaker 1: gas producers to quote maximize production.
Speaker 2: The Telecommunications Watchdogs says the twenty twenty two Opta cyber attack,
Speaker 2: which saw millions of customer details leaked, was preventable. The
Speaker 2: Australian Communications and Media Authority or AKMA, has filed a
Speaker 2: submission in the Federal Court alleging the leak was due
Speaker 2: to a quote coding error from September twenty eighteen. AKMA
Speaker 2: said optors failed to address the issue, leaving them quote
Speaker 2: vulnerable to attack. The telco has previously rejected claims it
Speaker 2: failed to protect customer's personal information and said it would
Speaker 2: defend itself against akma's legal action.
Speaker 1: Australia will send two million dollars in aid to Papua
Speaker 1: New Guinea as it continues its recovery efforts from last
Speaker 1: month's deadly land sides. Hundreds of people in a remote
Speaker 1: village in p Andng's Anger Province were killed in the
Speaker 1: natural disaster. The federal government funding will go towards restoring
Speaker 1: a major highway in the region, as well as health services.
Speaker 2: And today's good news is just for back pain sufferers.
Speaker 2: I just literally just felt myself sit up straighter. Australian
Speaker 2: researchers have found walking three times a week can decrease
Speaker 2: back pain. Macquarie University's Spinal Pain Research Group led a
Speaker 2: first of its kind trial with over seven hundred participants
Speaker 2: over one to three years. It found adults with a
Speaker 2: history of lower back pain were less likely to experience
Speaker 2: recurring discomfort if they walked regularly. Maddy Guest from your
Speaker 2: in Good Company joining us in the studio this morning. Maddie,
Speaker 2: so good to have you here.
Speaker 3: Thanks for having me Sam.
Speaker 2: I wanted to talk to you this morning about Burritos
Speaker 2: Mexican food, and the reason why is because guzmin N
Speaker 2: Gomez has just floated on the ASX. It's been listed
Speaker 2: and it had an incredible day as its first date.
Speaker 2: It's now worth over three billion dollars. What do we
Speaker 2: know about this company?
Speaker 4: The biggest reason Sam why I love investing is because
Speaker 4: you get to dig into the stories behind the companies
Speaker 4: that are on the Stock Exchange. And when we look
Speaker 4: at fast Food and guzmani Gomez in particular, it is
Speaker 4: all down to the man behind the business, a founder
Speaker 4: called Stephen Marx.
Speaker 3: So he grew up in New York. He had talks.
Speaker 4: About how he had quite a tough, I guess upbringing.
Speaker 4: He had a drug addict dad, he had a brother
Speaker 4: who was legally blind, and he worked really hard, got
Speaker 4: a job in a hedge fund at the age of
Speaker 4: twenty three, and then at the age of thirty he
Speaker 4: was burnt out and so he decided to move out
Speaker 4: to Australia. Not an uncommon story, No, and decided to
Speaker 4: move out to Australia. And what was missing when he
Speaker 4: moved out here It was Mexican food well, and so
Speaker 4: he started the business with a friend of his, also
Speaker 4: from the US, who had moved out here with an
Speaker 4: Ozzie that they had fallen in love with, another classic story.
Speaker 4: And so they bought out chefs from Mexico and they
Speaker 4: opened their first restaurant in Newtown in two thousand and six,
Speaker 4: closely followed by a Bondai junction, and today they have
Speaker 4: more than one hundred and thirty stores.
Speaker 2: And they're looking to have now over one thousand stores.
Speaker 2: It's really interesting you mentioned that point about them bringing
Speaker 2: out chefs. There's been sustained criticism of the company since
Speaker 2: then for not being fully owned by people from Mexico
Speaker 2: and there being a sense of cultural appropriation in the
Speaker 2: way that they present the business. They pushed back and
Speaker 2: said that there's really strong connections back to Mexico, and
Speaker 2: the founder, albeit from New York, you know, is proud
Speaker 2: of the company that he's built, clearly, and now it's
Speaker 2: gone from being a private company to a public company.
Speaker 2: Before we get back to the business itself, what does
Speaker 2: that actually mean.
Speaker 4: So when a company is private, it is owned by
Speaker 4: a small number investors. It might be the founders, it
Speaker 4: might be high networth individuals, private equity or even large
Speaker 4: institutional investors. But when a company goes public that means
Speaker 4: it lists on the stock exchange. So for example, in
Speaker 4: Australia we have the ASX and that's exactly what Goods
Speaker 4: Minigomez has done.
Speaker 2: So then what would the reasons be for the company
Speaker 2: to take that step from a privately held company to
Speaker 2: a public one.
Speaker 4: I think the biggest reason would be accessed more capital.
Speaker 2: And so when capital you mean money.
Speaker 4: Yeah, So when you list on the stock exchange, every day,
Speaker 4: people are able to buy and sell shares in the company,
Speaker 4: and as a result, that company is able to raise
Speaker 4: more money to do more things. And so in this case,
Speaker 4: a big part of the growth story for guzmni Gomez
Speaker 4: is expansion. They want to get more stores on the
Speaker 4: flip side. When a company goes public, they are subject
Speaker 4: to a lot more regulation, and so they have to
Speaker 4: report their financials at least half yearly, and I guess
Speaker 4: they're going to be under the eyes of investors. So
Speaker 4: people are going to be asking what is driving their
Speaker 4: financial performance and if it's not good, why is that?
Speaker 3: Just under more pressure?
Speaker 2: In general from an actual company perspective, Sure, they get
Speaker 2: more cash, but does anything actually change about how they run?
Speaker 4: When you go public on the stock exchange, it also
Speaker 4: provides what we call liquidity to the existing investors, and
Speaker 4: that means that they're able to sell some of their
Speaker 4: shares and get some money back. And in the case
Speaker 4: of GUZMANI Gomez, it's super interesting. They actually have investors
Speaker 4: that were related or connected to the founding group of McDonald's,
Speaker 4: and so it's a super interesting group of people.
Speaker 2: That's a really interesting point about McDonald's obviously a major company,
Speaker 2: you know, monetarily in world markets. I've actually seen some
Speaker 2: commentary that Guzman was calling itself the next McDonald's, and
Speaker 2: now we're using that kind of success story to show
Speaker 2: investors what was going to be possible. But for consumers
Speaker 2: in the restaurant, if you're going to go down to
Speaker 2: your local Guzman tomorrow, does anything change for them now
Speaker 2: that the company.
Speaker 3: Is public look day today, The answer is no.
Speaker 4: I think the biggest challenge for GUZMANI Gomez is going
Speaker 4: to be as they continue to grow at this really
Speaker 4: rapid rate, are they able to maintain that really sort
Speaker 4: of tight company culture they've referred to and really taken
Speaker 4: pride in in the past. You know, I've listened to
Speaker 4: the CEO and founder talk about how you know, they
Speaker 4: currently have one hundred and eighty stores. McDonald's has thirty thousand,
Speaker 4: and that's what they're trying to go towards. And so
Speaker 4: I guess you have to ask the question that if
Speaker 4: they have thirty thousand stores, how are they going to
Speaker 4: be able to maintain that high quality that they really
Speaker 4: pride themselves on.
Speaker 2: One other thing I've noticed in the reporting on Guzman
Speaker 2: going on to the AOSX is the word mote and
Speaker 2: the idea that people were challenging where the Guzman had
Speaker 2: a strong enough moat. What does that mean?
Speaker 4: So an economic moat is a classic Warren Buffett term,
Speaker 4: a very famous investor, and he always talked about how
Speaker 4: he liked to indus.
Speaker 3: Maybe my ninety three year old hall Puss. He always
Speaker 3: talks about how you like to invest in businesses with
Speaker 3: an economic moat.
Speaker 4: And basically what that means is if you imagine back
Speaker 4: in the day, You've got your castle that is surrounded
Speaker 4: by a moat with you know, alligators and water, and
Speaker 4: it's protecting from the enemies coming in and attacking the castle.
Speaker 4: So in this circumstance, what we're talking about is how
Speaker 4: is GUZMANI Gomez able to protect itself from competitors.
Speaker 2: From being copied?
Speaker 3: Exactly?
Speaker 4: What is stopping another Mexican store starting up and being
Speaker 4: just as good or better and expanding in the same
Speaker 4: way that Goosmani Gomez has.
Speaker 2: And so it was the undertone here that Gusman doesn't
Speaker 2: have a good moat.
Speaker 4: Yeah, so that's what some analysts are saying. And the
Speaker 4: other thing that's sort of coming into the commetary around
Speaker 4: that's related to this is the valuation of Guzmani Gomez
Speaker 4: And so often when you are investing, you want to
Speaker 4: look to the direct competitors for Guzmari Gomas. The other
Speaker 4: publicly listed food companies that are analysts comparing to are
Speaker 4: Dominos and Colin's Food, which is the sort of parent
Speaker 4: company of KFC franchises. Now, Guzmari Gomez is valued significantly
Speaker 4: higher than both of those companies, and so there's a
Speaker 4: lot of question around whether maybe there's a little bit
Speaker 4: of hype.
Speaker 2: Have there been any major criticisms or concerns from the
Speaker 2: investment community as this company has been talked about over
Speaker 2: the past few months.
Speaker 4: So I think we've talked about probably the two biggest
Speaker 4: and most important, which is do they have a strong
Speaker 4: economic moat and the valuation. But the other ones that
Speaker 4: I have been reading about are around supply chain. So
Speaker 4: we know the inflation continues to be quite high and
Speaker 4: there are quite a lot of flow on effects to
Speaker 4: supply chain. Gauzmni Gomez really prides itself on, you know,
Speaker 4: using free range chicken, the highest quality food, all these great.
Speaker 3: Inputs which are low price at a low price.
Speaker 4: And yet you have to ask a question that with
Speaker 4: these sort of more macro econom mcheadwinds, is that going
Speaker 4: to make it harder for Gouzmighti Gomez to be successful
Speaker 4: in the short term.
Speaker 2: Everything is going up and consumers constantly are looking for
Speaker 2: something cheaper, and if you position yourself as cheap, it's
Speaker 2: hard to kind of keep up with that race. So
Speaker 2: yesterday everyone gets very excited because for the first time
Speaker 2: ever you can buy shares in Gusman. It floats on
Speaker 2: the ax by the end of the day, so markets
Speaker 2: close at four pm. What happened to the share price
Speaker 2: and what does that tell you about how investors are feeling.
Speaker 4: The stock listed on the Stock Exchange at a price
Speaker 4: of twenty two dollars. People seem to really lack this
Speaker 4: share It was up over thirty five percent in one day.
Speaker 3: It's a great result.
Speaker 4: I'm sure everyone involved in the business itself will be
Speaker 4: very happy.
Speaker 3: People like their burritos.
Speaker 2: I also think there's an argument to be made for
Speaker 2: when a really visually appealing and visually familiar brand lists
Speaker 2: and people just kind of want to be part of
Speaker 2: it because they've had a burrito once a week for
Speaker 2: the last couple of years and they want to be
Speaker 2: part of the journey.
Speaker 4: I think that's the interesting thing about investing, right is
Speaker 4: you can have this business where all of the fundamentals
Speaker 4: tell you one thing, and by fundamentals I mean financials,
Speaker 4: how much money is it making, what are the costs involved.
Speaker 4: On the flip side, if people really like the brand,
Speaker 4: if people engage with it, then they kind of want
Speaker 4: to invest in it because they want to benefit financially
Speaker 4: from the way that they're interacting with it day to day.
Speaker 4: And so sometimes we see these circumstances where analysts and
Speaker 4: finance experts might be saying one thing, you know, the
Speaker 4: company's only worth this much, it's outrageous that they're value
Speaker 4: it that high. And then on the flip side, when
Speaker 4: it does list on the stock exchange, there's so much
Speaker 4: hype and people love this company so much that they
Speaker 4: don't care and they invest in it anyway.
Speaker 2: So if you want to buy stocks and Guisman now,
Speaker 2: and we're not giving financial advice, but more just as
Speaker 2: an idea. If you want to buy stocks and Guisman now,
Speaker 2: have you missed the boat?
Speaker 4: I would say my biggest reflection on IPOs when companies
Speaker 4: do go public is so often that initial few days, weeks,
Speaker 4: months is really really turbulent. And so we know that
Speaker 4: the stock price went up really significantly on day one,
Speaker 4: and it might keep going up, but it might also
Speaker 4: go down to and there's this interesting stat that around
Speaker 4: eighty percent of IPOs actually lose money. So I think
Speaker 4: when it comes to investing in businesses like this, when
Speaker 4: they're in this stage of infancy on the stock exchange,
Speaker 4: you really have to think about what is your risk tolerance.
Speaker 4: Because if you love risk and you love tacos, maybe
Speaker 4: this is a company that you want to do your
Speaker 4: research in and invest in. But if you are I
Speaker 4: guess more risk averse and you want to let it
Speaker 4: play out a bit, this company is going to be
Speaker 4: listed for a long time, and so you can sit
Speaker 4: and wait and let it kind of settle and then
Speaker 4: invest down the track. Once I guess, the adjustment to
Speaker 4: what we call public markets settles.
Speaker 2: Down really interesting. I can't believe that. You know, there's
Speaker 2: so much money in good Mexican.
Speaker 3: Food, three billion dollars apparently.
Speaker 2: Amazing. Thank you so much for joining us on the
Speaker 2: podcast today, Maddie, and thank you for joining us this
Speaker 2: week on The Daily Os. Maddie's actually got her own podcast.
Speaker 2: It's called You're in Good Company, really awesome financial discussions.
Speaker 2: I'll throw a links to that in today's show notes.
Speaker 2: We'll be back again on Monday morning. Until then, have
Speaker 2: a wonderful weekend.
Speaker 3: My name is Lily Maddon and I'm a proud Arunda
Speaker 3: Bungelung Cargoton woman from Gadighl Country.
Speaker 1: The Daily oz acknowledges that this podcast is recorded on
Speaker 1: the lands of the Gadighl people and pays respect to
Speaker 1: all Aboriginal and Torres Strait Island and nations. We pay
Speaker 1: our respects to the first peoples of these countries, both
Speaker 1: past and present.