Delivery Hero Gains on First Trading Day in Tech IPO Success

(Bloomberg) -- Delivery Hero AG rose as much as 8.6 percent in its first day of trading, giving the Berlin-based takeout company a market capitalization of 4.7 billion euros ($5.3 billion) in a successful debut on the Frankfurt stock exchange.

The food delivery broker, which connects customers and restaurants via its apps, rose as high as 27.70 euros after setting a final offer price of 25.50 euros, the ceiling of its range.

“It’s a nice example for other startups in Germany, when there aren’t so many," said Eric Leupold, head of the IPO department at Deutsche Boerse. “We had Rocket, Zalando, now Delivery Hero. It proves to founders it can work. That’s important.”

Delivery Hero operates a variety of brands including Lieferheld, Foodora and Foodpanda, through which it either brokers deliveries from restaurants or brings the food to customers’ homes itself, by bicycle. The food delivery sector is notorious for stiff competition, with rivals spending big on marketing to dominate a country because usually, the winner takes all. Delivery Hero is active in 42 markets and partners with about 150,000 restaurants.

The demand for shares in the company, which competes with app-based takeout services including Just Eat Plc, GrubHub Inc. and Takeaway.com, was good news for backer Rocket Internet SE, the Berlin-based startup incubator led by Chief Executive Officer Oliver Samwer that owns about 35 percent of Delivery Hero.

While Delivery Hero may have been an initial success, Rocket’s shares came under pressure from a different kind of food startup: Blue Apron Holdings Inc., a New York-based meal-kit delivery service, had a disappointing debut Thursday. That’s a problem not so much for Delivery Hero, whose main business is brokering orders for restaurants that deliver, but for Rocket Internet’s Hello Fresh, another IPO hopeful that also sends out meal kits and is comparable to Blue Apron.

“The weak debut doesn’t bode well for Rocket’s hope to bring Hello Fresh to the market,” Neil Campling, an analyst at Northern Trust, said in a note to clients. Rocket Internet was down 2.6 percent in Frankfurt trading, its fourth day of losses.

Blue Apron closed unchanged at $10 a share Thursday after its IPO price had already been cut by more than a third to help stoke demand for the shares. Enthusiasm fizzled after Amazon.com Inc. announced it was acquiring grocery chain Whole Foods Market Inc. just days before the IPO. The stock fell 4.2 percent to $9.58 at 10 a.m. Friday in New York.

But Delivery Hero was unshaken.

“I’m not following the short-term volatility -- it’s the start of a big story,” Delivery Hero’s Swedish Chief Executive Officer Niklas Oestberg said in an interview on the exchange floor.  

“It takes a while to understand the story. But we explained it and some of the biggest banks were involved. We priced at the high end of the range,” he said. “In a sense it is already successful.”

Delivery Hero’s offering is for about 39 million shares, including an over-allotment, and the company will have about 172 million shares outstanding after the IPO, it said last week. Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley are arranging the sale.

In addition to Rocket Internet, Delivery Hero’s investors include South Africa’s Naspers Ltd., which acquired an 11 percent stake in May, Insight Venture Partners, and hedge fund Luxor Capital Partners, which owned almost 10 percent of the company.

Before the opening bell Oestberg and a couple of dozen of his employees gathered in a glass anteroom on the exchange floor where they poured sparkling wine, clapped shoulders and engaged in a group chant before heading to the front of the room.

To contact the reporters on this story: Aaron Ricadela in Frankfurt at aricadela@bloomberg.net, Stefan Nicola in Berlin at snicola2@bloomberg.net.

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Molly Schuetz, Lisa Wolfson