(Adds analyst comment, background)
By Tanya Agrawal
April 4 Shares of GrubHub Inc jumped as
much as 57 percent in their market debut as investors scrambled
for a piece of the biggest U.S online food-delivery service,
which delivers everything from expensive steaks to bento boxes.
GrubHub shares, sold for $26 in the initial public offering,
jumped to a high of $40.80 on the New York Stock Exchange on
Friday, valuing the company at $3.2 billion.
The company was formed in 2004 when founders Matthew Maloney
and Michael Evans grew tired of ordering pizza every night and
sought variety in the food that they could order online.
They set up a delivery network that now includes nearly
30,000 restaurants across 600 U.S. cities and London, changing
the way people order food.
Diners are increasingly turning to the company's website and
mobile app to order food, instead of reaching for paper menus
stashed away in kitchen drawers.
GrubHub, which merged with biggest rival Seamless last year,
processed more than 135,000 orders a day last year totaling $1.3
billion - still a fraction of the $67 billion that Americans
spent on takeout from restaurants.
GrubHub is backed by private equity players including
Warburg Pincus, Goldman Sachs funds and Thomas H. Lee Partners.
The company receives a commission from restaurants on orders
booked through its website and its mobile application.
Restaurants prefer services like GrubHub since it cuts down
the time spent taking orders on the phone during peak hours.
The company's revenue jumped 67 percent to $137.1 million in
2012, though net profit slipped to $6.75 million from $7.9
Mobile orders rose 43 percent in the fourth quarter of 2013,
compared with 20 percent in the same period in 2011, the company
said in a presentation to investors.
The deal with Seamless last August bolstered its presence in
the U.S. East Coast. Seamless has been popular with large
corporate firms, which order food for employees working long
"Seamless 15" is the popular term for first-year investment
bankers, who typically gain about 15 pounds while ordering food
using the website.
GrubHub's IPO follows other consumer internet stocks such as
digital coupon company Coupons.com Inc and British
online takeaway firm Just-Eat Group.
While Coupons.com shares nearly doubled in their trading
debut in March, those in Just-Eat rose as much as 10 percent on
their first day of trading in London on Thursday.
"Investors like smaller deals like GrubHub that are U.S.
focused and are insulated from economic uncertainties," said
Jack Ablin, chief investment officer at BMO Private Bank.
Improving economic fundamentals, record low interest rates
and strong capital markets have boosted the U.S. IPO markets,
nearly doubling IPO volumes for the first quarter.
In the first quarter of the year, 71 offerings raised $11
billion. In the same period last year, 34 IPOs raised about $7.8
billion, according to auditing firm PricewaterhouseCoopers.
GrubHub's directors and executives will own 34 percent of
the stock once the offering is completed.
The Chicago-based company's IPO raised about $193 million
after its upsized offering was priced at $26 per share, above
its expected range.
GrubHub shares were up 40 percent at $36.31 in afternoon
Citigroup and Morgan Stanley were the lead underwriters to
(Reporting by Tanya Agrawal in Bangalore; Editing by Maju
Samuel, Simon Jennings and Saumyadeb Chakrabarty)