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GrubHub Inc. (NYSE: GRUB) is the latest initial public offering (IPO) to take the market by storm in 2014, opening at $40 today (Friday), or 54% higher than its offer price. Through the IPO, the company raised $192 million, which easily beat previous projections.
The money raised in the IPO gives GRUB a valuation of approximately $2 billion.
GrubHub priced its shares at $26 on Thursday, which was above its proposed range of $23 to $25 per share. The GrubHub IPO had been gaining momentum for weeks, as the company revised its range last week from an initial range of $20 to $22.
When GrubHub set its offer price at $26, it also increased the number of shares it offered. The company had initially planned to sell 7.03 million shares, but upped that total to 7.4 million.
In early trading, GRUB stock hit a high of $40.79, but has since settled. The stock was trading near $36 at 12:00 p.m.
GrubHub allows users to place pick-up and delivery orders from restaurants either online or from their mobile devices.
At the end of 2013, GrubHub reported working with nearly 29,000 restaurants and had a customer base of 3.4 million active users. In 2013, it averaged 135,000 orders processed daily, making it the largest food delivery services provider in the United States.
GrubHub reported revenue of $237.1 million last year, which was a 67% increase from 2012. Its net profit was down on the year - from $7.9 million to $6.7 million - but the company attributed that drop to increased spending on sales and marketing. In August 2013, GrubHub acquired competitor Seamless for $422 million, which also contributed to the company's bottom line.
Those profit margins, even though they shrank in 2013, are part of what made GrubHub an attractive IPO investment. According to the Wall Street Journal, nearly 75% of the companies that have gone public in the United States this year were unprofitable at the time of their initial public offering.
Today's $40 opening price shows how attractive GRUB stock was to investors. But where the stock goes from here is contingent on this major factor...