GrubHub (NYSE: GRUB) CEO Matt Maloney cheered his company’s IPO on at the New York Stock Exchange Friday while shares of his company rocketed up beyond expectations. The company priced the IPO at $26 per share, but shares of the food delivery company opened at a stunning $40.80. After that, the price trickled down a bit over the course of the day. Shares closed at $34.00, a 30.77 percent increase over the initial offering.
There are actually three subsidiary brand names underneath the GrubHub banner. Another food delivery company, Seamless, merged with the larger company last year. They retain their original brand name. Seamless logos were seen around the NYSE along with three other names on all of the banners. There are also two menu websites, MenuPages and Allmenus. “GrubHub is our national brand,” says CEO Maloney. He went on to state that the Seamless brand name will be relegated mostly to New York’s Manhattan area from now on.
The food delivery giant took an average of 135,000 orders every day in 2013, and revenue climbed 67 percent up to $137 million. They are the largest food delivery service in the United States at this point. Maloney founded GrubHub in 2004.
Analysts say that the new company should have much growth potential in the future. Kathleen Smith of Renaissance Capital feels that investors are searching for any sort of growth in the currently stagnating economy. So far, Smith seems to be correct. Shares of GrubHub managed to rocket up over 35 percent at the opening of Friday’s market. There may be a demand for companies like this one with growth potential.
Joseph Pisani of the Associated Press says that the company is changing the way people order takeout food. Rather than driving around or phoning in orders, people can simply place orders online or through a smartphone application. Furthermore, many different restaurant choices are available all at once. The food delivery service then takes a small percentage charge from each order.
CEO Maloney says that ordering with paper menus and telephone calls is “ridiculous.” The company has begun airing advertisements across the nation for their new delivery service.
The large company does have some competition out there. Eat24 and Delivery.com have begun vying with GrubHub for customers in major cities. Alex Konrad, writing for Forbes, mentions that CEO Maloney’s new task will be to prove that online and smartphone food ordering can remain a growing business.
As for Friday, the company is off to a great start. This seems to be a perfect time for these offerings, as 64 newly trading companies have recently raised over $10 billion. It has been 14 years since this sort of market activity was last seen.
Americans spend around $70 billion each year on food pickup and delivery services. There is clearly room for food delivery companies to grow, but it will be up to CEO Maloney and others to convince Americans to use their services. Shares of GrubHub rocketed up and held their position 31 percent above the proposed IPO of $26. However, investors should also bear in mind that the share price did trickle down throughout the day on Friday, and that this downward motion could continue during the next week.
By Luke Sargent