GrubHub Revises IPO to $178 Million as Investors Show Interest


GrubHub, the Chicago-based food delivery service, has revised its offering size and now expects to raise up to about $178 million, as investors showed high interest in its initial public offering. Co-managers of the public offering are Citigroup and Morgan Stanley. This is a substantial increase from the $100 million the firm had expected to raise initially. At $20 to $22 per share, the company will offer four million shares and stock holders will sell three million shares at the New York Stock Exchange under the symbol “GRUB.” “The raised capital would be used for general operational purposes,” the company said.

Founded in 2004, GrubHub merged with its competitor New York-based Seamless last year, in a $421.5 million equity deal. Based on the $20 to $22 per share pricing, and after GrubHub decided to revise its IPO to $178 million based on investor interest, the company is now being valued at approximately $1.72 billion. Overall, the firm is selling just five percent of its stock to the public. Including the insider sales, GrubHub will have a float of about nine percent.

Of the three million shares being sold by stakeholders, 475,200 shares belong to CEO Matt Maloney. Assuming the investors interest remains and each share of the firm can be sold for $21, the founder can expect to cash in approximately $10 million. He would still be left with 2.1 million shares – 2.7 percent of the total stock.

Spectrum Equity Associates is the largest selling shareholder with 669,745 shares, worth $14.1 million. However, it will remain the largest investor even after this sale, with 10.6 percent of the total stock still under its name. Among other sellers, Chicago-based Origin Ventures plans to sell 229,225 of its 4.6 million shares, worth $4.8 million. Northbrook-based Leo Capital plans to sell 248,798 shares of its 2.7 million shares, worth about $5.2 million. Warburg Pincus, funds affiliated with Goldman Sachs and Thomas H. Lee Partners, are selling 5 percent of their respective holdings.

The firm, which offers customers take-out services from their mobile phones using an app across 600 cities in the US, said the restaurant takeout industry has huge potential and can be worth $67 billion annually. The firm said that an average order placed from its app is between $25 to $30 and the firm charges approximately 17 percent of the total food bill in commissions.

In its regulatory filing to the Securities Exchange Commission, the firm said that in 2013, it had processed 135,000 orders worth $1.3 billion. Independent restaurants, which account for 61 percent of all US restaurants and generated sales worth $204 billion in 2013, are GrubHub’s clientele. In its Securities Exchange Commission filing, the firm also claimed to have 28,000 of these restaurants on board with them.

GrubHub said that though net income had declined by 15 percent to $6.7 million last year, their revenues had increased by 67 percent to $137.1 million the same year. The popularity of the business and the interest investors have shown is the reason the GrubHub decided to revise its IPO to $178 million. The number of “active diners,” the key metric to measure the business, commonly referred to as unique users in technology circles, jumped from 986,000 in 2012 to 3.4 million in 2013, showing the service delivery firm does have potential, which is the key factor for the investors interest.

By Faryal Najeeb


Crain’s Chicago Business
Los Angeles Times