The investors, including top shareholder Leonard Green & Partners LP, Select Equity Group LP and founder Daniel Meyer, would be able to sell nearly all of their stakes.

All holders of the company's Class B shares will be able to sell their holdings after the conversion, according to a regulatory filing on Thursday. (http://1.usa.gov/1WOUqgk)

Shake Shack said insiders could sell about 26.2 million shares, worth about $1.27 billion. Shake Shack had 36.3 million shares outstanding as of Wednesday.

Leonard Green and Select Equity would hold less than 1 percent each if they choose to sell all the shares they are allowed to. Leonard Green currently holds nearly 20 percent of Shake Shack's shares and Select Equity owns 14.2 percent.

Founder Meyer, who also owns the Gramercy Tavern and Union Square Cafe restaurants in New York City, would hold just over 30,000 shares if he decides to cash out.

Shake Shack's shares closed down 4.6 percent at $46.22 on the New York Stock Exchange. Up to Thursday's close, the stock had more than doubled in value since its debut on Jan. 30.

More than 191,000 shares of the company were traded on Thursday, nearly three times their 25-day moving average.

(Reporting by Ramkumar Iyer in Bengaluru)