As CEO Predicts Strong Growth Due To ‘Very, Very Sticky’ Customers, Delivery Hero Soars On Debut

As shares of online food takeaway company Delivery Hero surged higher on the company’s stock market debut, the company appeared to whet investors’ appetite on Friday.

“I’m glad we have had a good start but this is really about the long term… (it’s) about the next 10 to 15 years to build a very good service,” CEO Niklas Ostberg said.

Shortly after Friday’s opening bell, the company’s shares rose over 3 percent. In order to raise around 1 billion euros ($1.14 billion), the start-up had priced its initial public offering (IPO) at top end of the price range. On the Frankfurt Stock Exchange at $25.50 a share, it placed almost 19 million new shares and 15 million existing shares on Wednesday.

In a move which had split opinion among analysts assessing its profitability, the loss-making German firm is set to trade at a premium in comparison to its peers. While some traders have warned the company could be vulnerable to sustaining heavy losses, many others have pointed to Delivery Hero’s larger global footprint as reason to justify its premium rate.

“I think we will continue to go for growth… we also see that our customers are very, very sticky. They stick with us for years and years and years and order more and more frequently and I think that’s what investors really like,” Ostberg said when asked how the firm planned to soothe investor concerns regarding the start-up’s loss-making track record and premium rates,

‘I don’t think we need to worry about rivals’

While existing rivals Deliveroo and Just Fat continue to expand and with new players such as Uber and Amazon entering the sector, the online food and delivery space has become increasingly competitive. With around 150,000 restaurants on its platform and operating in over 40 markets globally, Delivery Hero was founded in 2011.

“As long as we have the best service in the market, the best product in the market… I don’t think we have to worry a lot,” Ostberg said, when asked whether Delivery Hero could compete with the likes of Uber and Amazon.

Following in the footsteps of Just Eat, Takeaway.com and GrubHub – which have all seen their share prices surge since listing, Delivery Hero is the fourth major online food delivery company to go public in recent years.

In order to repay loans and to finance the growth and development of its business, it will use the funds raised from its listing, the company has said.

A key part of Delivery Hero’s growth strategy has been acquisitions. It acquired Yemeksepeti in Turkey, preceded by the buying of Talabat.com, an online food takeaway firm based in Kuwait, in 2015. The acquisition of Foodora followed shortly after.

Rocket Internet, a publicly-listed start-up factory which owns around a 35 percent stake in Delivery Hero is also likely to be boosted by the IPO.

Rocket Internet has struggled to turn a profit from its investments in start-ups even though it has a number of companies in its portfolio.

(Adapted from CNBC)

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