Chipotle Mexican Grill (CMG) Shares Pummeled as E. Coli Outbreak Spreads to Six States

Shares of Chipotle Mexican Grill Inc. (CMG) were trading down -15.18 or -2.83 percent to $521.01 per share in Monday’s premarket after news on Friday that the outbreak of E. Coli from food served at the fast food chain had spread to six states. Chipotle’s stock closed at $536.19 per share, off -75.32 or -12.32 percent in Friday’s regular trading session.

Denver, Colorado based Chipotle Mexican Grill Inc. is a restaurant chain founded by Steve Ells in 1993, with 16 locations in Colorado.
McDonald’s Corporation MCD then invested heavily in the company in 1998. McDonald’s divested its shares in the company in 2006 after the company had grown to 500 locations. The restaurant chain now has 1,755 locations in the United States, six in England, seven in Canada, three in France and one in Germany and employs more than 37,000 people worldwide. In addition, the company operates nine ShopHouse Southeast Asian Kitchen restaurants and two Pizzeria Locale restaurants.

The E. coli outbreak in Chipotle restaurants was first identified in Portland, Oregon and Seattle, Washington where the company shut down all 43 of its restaurants in the region on October 31st. Chipotle reopened those 43 restaurants last week. Nevertheless, the Center for Disease Control (CDC) said that 45 more people had become sick with E. Coli with 43 of them reporting they had eaten at a Chipotle restaurant.

Escherichia coli, better known as E. coli is a rod shaped bacterium found in the lower intestine of most warm blooded organisms. While harmless strains of the bacteria are essential in the gut flora for the proper digestion of food, some serotypes of the bacterium can cause serious food poisoning in people affected by the bacterium and in some extreme untreated cases can result in the death of the host.

Infection with the bacterium is most commonly achieved through fecal-oral transmission. Treatment for the condition is generally done by assessing the level of dehydration and replacing the ingestion of fluids with electrolytes. Treating the condition with antibiotics such as fluoroquinolones or azithromycin has been shown effective in shortening the time of the illness.

Of the 43 new cases suspected to be from Chipotle restaurants, sixteen people were hospitalized, with no deaths so far. The new cases were reported from Chipotle restaurants in Amherst, New York, Turlock, California, Akron, Ohio and Burnsville, Minnesota.

In addition to the news of the outbreak spreading to four other states, adding to the pressure the stock is already under, Chipotle stock was downgraded this morning by Sterne Agee CRT from a Buy recommendation to Neutral,. Chipotle stock was the best performing restaurant stock before the outbreak, having traded as high as $758.61 on August 5th.

The selloff in the stock has shed -28 percent of the company’s market cap since making its yearly high in August. Nevertheless, the stock has recovered significantly in this morning’s premarket and is now down only -1.19 or -0.22 percent to $535.00 per share.

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Published on Nov 23, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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