GrubHub (GRUB) Up Over 30 Percent in Initial Public Offering
Shares GrubHub Inc. (GRUB) closed up +8.00 or +30.77 percent to $34.00 per share on Friday, after the company had their initial public offering. The company had priced the offering at $26 per share on Thursday night after an initial range of $23-$26 per share. The stock originally opened up +56 percent at $40.00 per share.
Chicago, Illinois based GrubHub is a food ordering service company founded in 2004 and the 2006 winner of the University of Chicago Booth School of Business New Venture Challenge.
The company then received its initial venture capital funding in 2007, allowing the company to expand its business to San Francisco and Boston. GrubHub currently works with 29,000 restaurants in 600 U.S. cities with a customer base of 3.4 million active users. GrubHubâ s service basically allows a person to order food from a restaurant for delivery or pick-up off of the Internet over their computer or mobile device. Friday, the companyÃƒÂ¢ s co-founder and CEO, Matt Maloney rang the opening bell of the New York Stock Exchange amid costumed children in food costumes prancing on the trading floor. FridayÃƒÂ¢ s offering of 7.03 million shares raised $197 million for the company, which it will use for acquisitions and expansion. The company recently bought competitor Seamless, which connects GrubHub customers to 25,000 locations in the U.S. and London, England. The two companies processed an estimated 130,000 orders per day in 2013. GrubHub had roughly $1.3 billion in combined Gross Food Sales on their platforms last year. While some analysts are not too keen on the companyÃƒÂ¢ s valuation after FridayÃƒÂ¢ s performance, the company reported revenue of $237 million last year, 67 percent better than in 2012, net profit declined from $7.9 million to $6.7 million. The acquisition of Seamless in August of 2013 for $422 million was the main reason for the decline. The attraction for GrubHub is that the company is already a leader in its field, more so after the Seamless acquisition. In addition, the company is already profitable, which is a big plus for investors. According to some sources, 75 percent of initial public offerings are for companies that have yet to show a profit. Investors were keen on the deal, taking the new issue as high as $40.79 per share on Friday, giving the company a valuation of over $3 billion. The IPO was managed by Citigroup Inc. (C
) and Morgan Stanley (MS
). Other investors that sold shares in the offering were Warburg Pincus LLC and Spectrum Equity Investors. While the companyÃƒÂ¢ s valuation after the initial offering seems high to many analysts, history has shown that many companies that start with a high valuation eventually catch up with increased business after offering shares. Companies such as Google (GOOG
) and Amazon (AMZN
) both had high valuations after their initial offerings. Other News About GrubHub GrubHub and Seamless complete merger
GrubHub takes over competitor before IPO. Should You Take A Bite Of GrubHub's IPO?
Article on the pros and cons of the recent offering. Other Stocks in the News GM Investors Unshaken as Recall Cuts $3 Billion in Value
Company has lost $3 billion in value after recalls. Four Reasons To Avoid Apple Stock
Forbes article cautioning investors on Apple.
Published on Apr 7, 2014
By Jay Hawk