Jim Cramer: Shake Shack Can Live to Play Another Day
Shake Shack (SHAK) - Get Report announced it will return a $10 million small business loan it received from the federal government as part of the CARES Act.
Shake Shack noted that it received the funding it needed to continue via an “equity transaction.”
The Paycheck Protection Program which aims to assist small businesses during the coronavirus pandemic and the social distancing used to combat it, ran out of funding last week, though some reports indicate additional funding may be agreed upon soon.
Bloomberg reported that more than a dozen publicly traded companies received PPP funds before the program ran out of money. Shake Shack was among the recipients.
In a letter published to LinkedIn, Shake Shack founder Danny Meyer and CEO Randy Garutti wrote that Shake Shack could not accept government assistance while smaller restaurants without the resources of a larger company remain in dire need. “We’re fortunate to now have access to capital that others do not. Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours,” the statement said
The letter also critiqued a lack of clarity from the CARES Act on what funds were available for restaurants and how long they would be available. “There was no fine print, anywhere, that suggested: ‘Apply now, or we will run out of money by the time you finally get in line,’” the letter read.
Following this move of altruism from Shake Shack, how should investors approach the stock?