April 5, 2014 in Business

GrubHub shares soar 30 percent on first day

Joseph Pisani Associated Press
 
Associated Press photo

GrubHub CEO Matthew Maloney, trailed by costumed characters, walks the New York Stock Exchange trading floor before his company’s IPO begins trading Friday.
(Full-size photo)

NEW YORK – Wall Street has a major craving for takeout.

Investors sent shares of GrubHub Inc. up more than 30 percent Friday in an initial public offering that gave the online food ordering service a market capitalization of nearly $2.7 billion.

GrubHub is one of four companies to go public Friday in what has been a very hot IPO market, especially for businesses in the cloud software and biotech industries. There have been 71 IPOs priced so far this year, up 115 percent from the same time last year, according to IPO investment adviser and research company Renaissance Capital.

“Investors are looking for growth in a slow-growth economy,” said Kathleen Smith, a Renaissance principal.

Smith said she is seeing signs of investors getting more cautious, though, after some hot debuts quickly cooled off. One such company is Castlight Health Inc. Shares of the cloud-based health care software company more than doubled on their first day of trading last month. But the stock is now down about 50 percent from the high of $41.95 that it reached during its March 14 debut.

Whether GrubHub can hold on to its gains remains to be seen. The company is attractive to investors because of its potential to grow in a new field, Smith said.

GrubHub is trying to change the way people order takeout from restaurants. Instead of calling in an order, people can order meals online or through a few taps on a smartphone app, and can search through many restaurants at once by cuisine or other specifications. The Chicago-based firm makes money by taking a percentage of each order. The company doesn’t say how much it charges, but restaurant owners have said it’s about 15 percent. The more a restaurant pays, the higher it appears in GrubHub’s listings.

CEO Matt Maloney said most people in the country are still ordering food with a paper menu and a telephone call.

“It’s ridiculous,” he said. “That’s where the growth is.”

GrubHub launched national TV campaigns last year to convert people to online ordering.

GrubHub also owns Allmenus.com and MenuPages, which posts menus from restaurants across the country. The company has 3.4 million active users and had revenue of $137.1 million in 2013, up 67 percent from the year before.

GrubHub raised $192.5 million Friday after pricing more than 7.4 million shares at $26 each. That was better than the company’s previously expected range of $23 to $25 per share. The stock is trading on the New York Stock Exchange under the ticker symbol “GRUB.”

Shares surged $8, or 31 percent, to close at $34, and hit a high of $40.80 earlier in the session.

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