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Just Eat becomes first company to IPO on London's "tech market"

High Growth Segment hasn't attracted any listings until now

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The London Stock Exchange got a boost today as online takeaway delivery service Just Eat made its debut on the high growth segment (HGS) of the main market, in what is billed to be London's largest technology floatation in eight years.

The HGS, set up by the London Stock Exchange in partnership with Tech City UK as a new segment on the main market, allows fast-growing companies to list shares and raise money, while retaining 90 percent of the equity. It is designed to be an IPO launchpad for booming companies – many of them in the technology sector – that are too big for the alternative investment market (AIM) but are not yet ready for a premium listing, which would require them to give up 25 percent of the company.

Despite being live for roughly a year, tech companies have shunned the HGS until now, with many, including Candy Crush creator, King, abandoning London completely and choosing to list in New York instead, where some argue there is more capital available, an abundance of technology analysts and a better overall tech ecosystem.

Today Just Eat issued 24.6 percent of its overall shares on the HGS, after revealing last month that it was either going to list on the HGS or London’s premium market. 

The floatation valued the company at £1.47 billion, more than 100 times the company’s underlying earnings of £14 million. 

The shares hit 285p but dropped back to 262p within the first hour of trading, just above the initial public offering price of 260p.

The company, selected as one of Tech City UK’s Future Fifty firms, said it will receive £100 million from the offer, while the rest will go to its venture capital backers (SM Trust, Index Ventures, Vitruvian Partners, Redpoint Ventures and Greylock Partners), as well as senior management, employees and former staff, who are selling down their stakes as part of the flotation.

Just Eat, founded in Denmark in 2001 but relocated to London five years later, said it will use the proceeds to fund further expansion and acquisitions.

The company, which has more than 36,000 restaurants on its books, charges nearly 11 percent commission for each delivery ordered over its platform, of which there were 40 million last year, worth an average of £2.11 per order.

Tech City UK chairman Joanna Shields was keen to point out that Just Eat is the third company to list out of the 50 companies selected for Tech City UK's Future Fifty scheme.

But TechMarketView analyst Richard Holway questions whether Just Eat is even a tech company. 

"Clearly Just Eat, AO.com, BooHoo.com and the rest have great business models and are highly disruptive in their respective markets. But they are just companies that use tech in their businesses rather than tech companies in any established definition," he wrote. 

"They have little or no IPR (intellectual property rights). Their models are easy to copy – indeed as Groupon found. They may be fast growing at the moment but we know the totality of the fast food, white goods or fashion markets. We know that growth will slow as market share increases."



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