If everything goes perfectly and the company has created a lot of buzz and momentum, there is interest to buy at a price above what has been printed on the S-1. As the pricing approaches, the company responds to this interest by increasing the price. Then the investors respond to the new price. This cycle repeats two to three times as the date approaches.
So, the price was not based on fundamentals of the business, but rather buzz, hype, and tactics like restricting the number of shares. The common stock price has since risen but it's now running a P/E ratio of 135 (1).
Who is getting the short end of the stick when reality kicks in? Mom and pop investors? Mutual funds and pensions?
Also, what's with the "bootstrap" banner at the top of the page? Grubhub took $84 million in funding (2).
Institutions and mutual funds hold about 50% of the stock. Then with employees, any remaining shares held by venture backers, and traditional insiders it's likely the extreme majority of damage at this point would be to non-Mom & Pop investors.
Sounds like they had a pretty long period of bootstrapping compared to most startups that have gone public. Compare to Facebook which says it was founded Feb 2004 and took it's first round in Sept 2004.
So, the price was not based on fundamentals of the business, but rather buzz, hype, and tactics like restricting the number of shares. The common stock price has since risen but it's now running a P/E ratio of 135 (1).
Who is getting the short end of the stick when reality kicks in? Mom and pop investors? Mutual funds and pensions?
Also, what's with the "bootstrap" banner at the top of the page? Grubhub took $84 million in funding (2).
1. http://research.investors.com/quotes/nyse-grubhub-inc-grub.h...
2. https://www.crunchbase.com/organization/grubhub