In the biggest UK technology IPO in the last eight years, Just Eat, the online takeaway service, debuted on the London Stock Exchange today. The market valued the company at £1.47 billion ($2.44 billion), at 260 pence per share. This is top of the pricing range the company was after in January and puts its value at over 100 times its EDIITDA and 15 times sales. The float comes as US competitor GrubHub is preparing to list on the New York Stock Exchange at a $2bn valuation.
The float raises £100 million for the company and as much as £287 million for those shareholders selling their stakes: the directors and major investors such as SM Trust, Index Ventures, Vitruvian Partners, Redpoint Ventures and Greylock Partners. The company raised around €90 million over its life as a private company. Index invested around €25m, Redpoint & Greylock €15m each and Vitruvian about €50m.
The company created £96.8m in revenues in 2013, more than 60 per cent up on the previous year. But the valuation looks high even when compared with other companies in the buoyant UK tech sector.
The global market for takeaway food is estimated as being $93 billion in 2013, according to research group Euromonitor, and is predicted to grow to $104 billion by 2017.
Just Eat’s flotation is the first ever on the on the LSE’s “high growth segment”, a special section of the exchange aimed at encouraging high-growth companies to list. That means it is only obliged to make just under 25 per cent of its shares available to investors. A normal LSE listing would require a quarter of the shares to be made available. This is the LSE’s attempt to encourage more ‘NASDAQ style’ IPOs in the UK.
Is Just Eat the “WhatsApp of takeaway” as CEO David Buttress calls it? Probably not. But the flotation has been a boost to the UK’s tech startup industry which is looking to create more ‘locally-gown’ and floated home-runs.
How does Just Eat work? A restaurant pays £699 for a physical hardware terminal that must be used to process orders. Customers then place orders for food to be delivered, with the orders coming via the terminal. Those restaurants pay to register on the platform and Just Eat takes commission of 10 to 12 per cent on each order.
About 50 per cent of customers return to Just Eat after the first sale. The average customer orders 10 times in a year. Over a quarter of visitors to the site and app buy food, with more than half of orders via mobile.
Just Eat has 36,000 restaurants, though it has to spend a lot on marketing to maintain and grow that base. Just Eat also owns Alloresto. SEC filings reveal that GrubHub is also spending a lot on marketing. Just Eat’s revenues per user are £16. GrubHub’s are around $40, as it also works with corporate catering customers
However, Just Eat mainly just connects the customer with venue. So there’s little to stop a restaurant just going around Just Eat’s platform and getting direct relationship with the customer.
That said, Just Eat wants to provide more services for small restaurants to go deeper into those businesses. Buttress says they lag to offer a platform for the order tracking, the walk-in orders, the telephone orders, the online orders, the data, staff payments and stock reconciliation.
Just Eat was founded in Denmark in 2001 and operates in 13 – mainly European – countries.