GrubHub's initial offering valued the company at around $2 billion.
GrubHub makes its money by taking a cut from restaurants when an order is placed through one of its websites. Its revenue soared 67% over 2013 to $137.1 million. However, its net income last year was only $6.7 million. (What You Need to Know About GrubHub's NYSE Market Debut).
Wall Street proves hungry for GrubHub shares
GrubHub’s initial public offering might not excite Silicon Valley in the same way Twitter’s or Facebook’s IPO did, but investors on Wall Street have greeted the company with open arms as its share price rose 45 percent in early trading.
The company priced its shares at $26 — higher than the company forecasted in its initial price range — and was trading at nearly $41 early this morning. (It is trading at $37.70 at time of writing.) The excitement comes on the back of a surge in orders placed on mobile devices in the last few years and a 67 percent increase in revenues between 2012 and 2013.
GrubHub isn’t exactly the flashiest tech company around. It’s an established player in what might be seen as a trivial market: ordering food and making sure it gets delivered to your door. While that is certainly useful, especially if you live in a closet apartment that isn’t conducive to actual cooking, on a scale from “the wheel” to “virtual reality” GrubHub lands somewhere around the “phonebook.”
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CNN Money points out that GrubHub’s profits are declining and that it has some legal issues:
GrubHub has reported strong growth in the past few years. The company generated $137 million in revenue last year, up significantly from 2012, according to its filings with the Securities and Exchange Commission. It had 3.4 million “Active Diners” and more than 28,000 affiliated restaurants.
But despite the growth, GrubHub’s profits have been declining. Net income last year was $6.7 million, down from $15.2 million in 2011.
The company is facing a potentially expensive lawsuit by a software company in San Diego that claims GrubHub, along with several other food and technology companies, violated patents related to online order-synching technology and online menus.
Bloomberg offers some more financial context for the IPO:…
E-commerce companies in the U.S. fetch an average of 2.5 times last year’s sales, while Internet services companies trade at over 6 times, data compiled by Bloomberg show. GrubHub lists its competitors as traditional restaurants, which trade at much lower valuations. The Bloomberg U.S. Full-Service Restaurant Index, which includes Buffalo Wild Wings Inc. and Darden Restaurants Inc., trades at about 1 times sales.
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