Naspers-linked Delivery Hero gains on first trading day in tech IPO success

Frankfurt - Delivery Hero AG rose as much as 5.55% its first day of trading, giving the Berlin-based startup a market capitalization of €4.5bn in a successful debut on the Frankfurt stock exchange.

The food delivery company, which connects customers and restaurants via its apps, rose as high as €26.90 a share and traded at €26as of 09:55 after setting a final offer price of €25.50, at the ceiling of a range projected as low as €22 last week.

“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.

READ: Naspers invests R5.6bn in German food delivery service

The demand for shares in the company, which competes with app-based takeout services including Just Eat Plc, GrubHub and, should be good news for backer Rocket Internet, the Berlin-based startup incubator led by CEO Oliver Samwer that owns about 35% Delivery Hero.

However, Blue Apron Holdings, a New York startup that offers meal-kit delivery service, had a disappointing IPO Thursday, when it closed at $10 a share - its IPO price had already been cut by more than a third to help stoke demand for the shares. Inc.’s acquisition of grocery chain Whole Foods Market Inc. has put pressure on Blue Apron. 

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. Rocket Internet was 1.3% in Frankfurt trading.

"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.  

READ: Naspers-backed Delivery Hero targets $500m in IPO

"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% in May, Insight Venture Partners, and hedge fund Luxor Capital Partners, which owned almost 10% the company.

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