GrubHub feeds IPO market’s appetite

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Posted: Saturday, April 5, 2014 12:00 am

The year’s hot IPO market maintained its sizzle Friday.

GrubHub Inc., which lets hungry city dwellers order food online, surged in its trading debut after raising a higher-than-expected $192 million in an initial public offering.

The shares rose 31 percent to $34 after the company, which runs websites including Seamless.com and Menupages.com, and its shareholders sold the stock at $26 apiece.

The company was one of four that made their debuts as publicly traded companies Friday. The others included health data service IMS Health Inc., which raised about $1.3 billion in its return to the market.

The market for IPOs has been strong so far this year, especially for companies in the cloud software and biotech industries, and it has reached levels unseen in years. Next week is expected to be busy, with about 15 companies expected to debut, including auto lender Ally Financial Inc., which has been under government control since the financial crisis, and hotel chain La Quinta Holdings Inc.

Companies worldwide raised $47.2 billion in new stock sales during the first quarter, up 98 percent compared with those in the same period a year earlier, according to Thomson Reuters.

The United States has proved even busier, with 64 companies raising $10.6 billion in the most active first quarter since 2000, according to data from Renaissance Capital.

So far, the pace of new offerings shows little sign of slowing down. Several big names — including the Alibaba Group, the Chinese online commerce giant whose coming IPO could set records for size — are expected to debut this year. Other eagerly anticipated offerings include those for Box, the online storage provider, and sports camera maker GoPro.

“The pipeline is really strong,” said Neil Dhar, the U.S. leader of PricewaterhouseCoopers’ capital markets practice.

As the stock markets continue to boom, aided by low interest rates, investors have continued to clamor for IPOs as mutual funds and other financial players chase growth.

“When most offerings go out, they’re way oversubscribed,” Dhar said. “Investor sentiment around IPOs is still very strong.”

GrubHub, founded in 2004, and its rivals are changing the way people order takeout from restaurants. Instead of calling a restaurant, 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.

GrubHub 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 that a restaurant pays, the higher it appears in GrubHub’s listings.

Investors are betting the Chicago-based company can keep expanding beyond 28,800 restaurants in 600 cities from San Francisco to London to capture more users. Rival Just Eat Plc, rose 9 percent in London trading Thursday after raising about $600 million in the largest e-commerce IPO in almost three years, data compiled by Bloomberg News show.

“GrubHub fits this pattern of very successful IPOs that operate in a niche industry, linked to the U.S. consumer and technology,” Josef Schuster, founder of Chicago-based IPOX Schuster LLC, said. “They benefit from risk appetite being so strong in the stock market and from the positive momentum.”

This report includes material from the Associated Press and the New York Times.

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