Initial Public Offerings (IPO) continues to enjoy the favors
of the market. The latest one being
GrubHub Inc. (
, whose shares surged 30.8% ($8.00) to close at $34.00 on Apr 4,
2014. The online food-delivery service raised $192.4 million on
IPO, much higher than its initial expectations.
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The sharp jump in GrubHub shares reflects growing appetite of
investors for IPOs, particularly in technology and
Internet-related sector. Except
King Digital (
, the developer of Candy Crush Saga (dropped 16.0% in its first
trading day) most of the IPOs from the sector were successful to
date in 2014.
GrubHub initially offered 7.0 million shares with a price range
of $20.00 to $22.00 per share. However, the strong IPO market
pushed the company to raise the price range to $23.00 to $25.00.
GrubHub finally sold 7.4 million shares for $26.00.
Morgan Stanley (
were the lead underwriters.
GrubHub has approximately 28,800 restaurant partners across 600
cities, which pay a fee when users place food orders. The company
noted that approximately 43.0% of orders came through mobile
devices in 2013. As of Dec 31, 2013, GrubHub had 3.4 million
Per S-1 filings, GrubHub processed 135K revenue generating orders
per day, while gross food sales were approximately $1.3 billion
in 2013. The company generated revenues of $137.1 million, up
67.0% from 2012. The Aug 2013 merger with New-York based Seamless
was a significant revenue contributor.
GrubHub targets independent restaurants, which account for 61.0%
of all U.S. restaurants. Per the company, Americans spent
approximately $67.0 billion on takeout at these independent
eateries, which is expected to jump rapidly. We believe
that improving mobile engagement will boost GrubHub's
top-line growth in 2014.
Moreover, GrubHub enjoys a first mover's advantage in the online
and mobile delivery service market. The company's strong base of
restaurant partners well positions it to face intensifying
competition from the likes of OpenTable, going forward.