JCP Investment Partnership, LP, along with JCP Investment Management, LLC, and other affiliates, has acquired a substantial stake in Red Robin Gourmet (NASDAQ:RRGB) Burgers Inc. (NASDAQ:RRGB). According to a recent SEC filing, the group purchased a total of 800,455 shares of Red Robin's common stock at a price of $5.19 per share, amounting to an investment of approximately $4.15 million. The transaction comes at a time when Red Robin faces significant financial challenges, with InvestingPro data showing the company operating with substantial debt of $594.5 million and experiencing negative free cash flow of -$48.5 million over the last twelve months.
This acquisition was part of a private placement agreement with Red Robin, allowing JCP Investment and its affiliates to increase their holdings significantly. Post-transaction, the shares are held directly by JCP Investment Partnership and in managed accounts of JCP Investment Management. The reporting entities, led by James C. Pappas, collectively own more than 10% of Red Robin's outstanding shares. According to InvestingPro, Red Robin's stock has shown significant volatility, with a 52-week range of $2.97 to $12.80, and currently trades near its Fair Value. Discover more insights and 13 additional ProTips about Red Robin's financial health with an InvestingPro subscription.
In other recent news, Red Robin Gourmet Burgers reported mixed financial results for the third quarter, with disappointing margins due to higher labor costs and general administrative expenses. The company's Chief Technology Officer, Jyoti Lynch, has also resigned to explore new opportunities. Despite these developments, Red Robin achieved solid same-store sales and total sales in Q3, with traffic trends showing improvement.
Analysts from Craig-Hallum and Benchmark have maintained a Buy rating on Red Robin shares, despite lowering their price targets due to increasing food and labor costs, and broader industry pressures. The company's management has revised its adjusted EBITDA guidance downward, anticipating continued margin pressures in the fourth quarter.
Red Robin's management has also made amendments to its credit agreement, increasing its revolving credit facility, extending the maturity, and providing some covenant relief. The involvement of activist investors is seen as a potential catalyst for urgent change, which could support the stock price. These are all recent developments that have occurred in the company.
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