IPO-hungry investors take bite out of Just Eat


Investors have taken a bite out of online takeaway service Just Eat as the company shares popped nearly 10 percent on its London stock market debut on Thursday.

The U.K. company was valued at £1.47 billion ($2.43 billion) on flotation after its stock was priced at 260 pence per share, the top end of its range.

Just Eat's shares rose to 285 pence on the open, a 9.6 percent jump, and were trading at 273.80 pence near midday. The company, which was founded in Denmark in 2001, expects to raise £360.1 million by selling nearly a quarter of the shares in the firm.

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The company said it will receive £100 million from the initial public offering (IPO) with the rest going to its venture capital backers, including Index Ventures and Vitruvian Partners and some of the senior management and employees.

Thursday marked the so-called "conditional dealings" of Just Eat, which is not open to the entire public and is usually traded by institutional investors. The "unconditional dealings" in which all investors can participate in share buying will begin on April 8.

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Just Eat's IPO comes amid a flurry of listings in the U.K. such as budget shop Poundland and online appliances retailer There have been 32 flotations on the London Stock Exchange this year, raising £5.73 billion.

Many analysts have expressed the concern about high valuations of the recent listings, particularly technology firms.

Richard Holway, chairman of Tech Market View, said that while the business is a good one, Just Eat should not be labelled a technology company and fetch such a high valuation.

"My problem is that we label so many companies as tech stocks so giving them frothy tight valuations," Holway told CNBC in a phone interview.

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"Ultimately they will have to have a mature, tight valuation eventually. I'm fearful that if the bubble bursts and their share price goes down, it will ripple through all of the tech stocks."

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Just Eat is the first company to list on the London Stock Exchange's "High Growth Segment", a part of the exchange's main market which allows mid-sized firms to access capital. In 2013, Just Eat generated revenues of £96.8 million, a 61 percent increase on the year before, with underlying earnings before interest, tax, depreciation and amortisation of £14.1 million.

According to Tandeep Minhas, partner at Taylor Wessing, going through the High Growth Segment is a good way for a small company like Just Eat to raise funds.

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"It's a special route for high-growth tech companies to get themselves in to the main market without having the financial track record that companies usually need to have," Minhas said in a phone interview.

"I think it will get off to a good start, it is a very well-recognised brand, people know about it and have probably used the system already."