05/21/2012 12:51 pm ET Updated Jul 21, 2012

Chipotle Shares Plunge Following SEC Investigation Announcement

* SEC joins immigration investigation

* Shares fall nearly 2 pct before rebounding

May 21 (Reuters) - Shares of Chipotle Mexican Grill Inc fell as much as 1.8 percent on Monday, the first day of trading after the company said the U.S. Securities and Exchange Commission had joined a probe of the hiring practices of the popular burrito chain.

The shares later recovered to trade slightly higher in early afternoon.

The Denver-based company, one of the restaurant industry's top performers, fired hundreds of workers in 2010 and 2011 after audits by the U.S. Department of Homeland Security's Immigration and Customs Enforcement (ICE) arm turned up undocumented workers on payrolls in Minnesota, Virginia and Washington, D.C.

The SEC has joined Homeland Security and the federal prosecutor's office for Washington, D.C., in investigating the company's compliance with immigration laws.

Chipotle said on Friday that it received a subpoena from the SEC on May 17 and intended to fully cooperate with the agency's investigation.

The subpoena requested "information regarding our compliance with employee work authorization requirements, our related public statements and other disclosures, and related information," Chipotle said in a regulatory filing.

"The SEC would be looking for a false statement, omission or scheme to deceive, especially affecting income," James Brosnahan, senior partner at Morrison & Foerster in San Francisco, told Reuters. Brosnahan is not related to the Chipotle case.

Chipotle attorney Robert Luskin on Friday told Reuters that it was not unusual for the SEC to join an investigation and said he was "very confident that the SEC will find that the company fulfilled all of its obligations."

But Miller Tabak & Co analyst Stephen Anderson said in a client note, "Although a lawyer representing (Chipotle) said it was not uncommon for companies to receive SEC probes, we do not find this to be the case."

He added, "Nevertheless, we anticipate limited headline risk unless it is found that (Chipotle) performed inadequate screening procedures in additional markets."

Chipotle is the highest-profile U.S. company to come under the scrutiny of ICE since it shifted enforcement to employers from workers in 2009.

Investors have flocked to Chipotle in large part for its soaring sales and ability to contain labor costs. Many investors are keeping tabs on the financial impact of the immigration probe.

Unlike many rivals, Chipotle owns and operates its more than 1,000 U.S. restaurants and is ultimately responsible for hiring.

Audit-related terminations already have forced the company to spend money to train replacement workers.

Chipotle shares made their debut in 2006 at $22. On Monday afternoon, the shares were up 0.3 percent at $393.29. Earlier in the day they fell as low as $384.95. (Reporting By Lisa Baertlein in Los Angeles; editing by John Wallace and Matthew Lewis)