Grubhub Rival Waitr to Go Public through Merger with Landcadia Pending November 15 Vote
There’s still a chance to invest in online food delivery before the real lines show up.
Waitr, an online food delivery company that pairs up with full-service restaurants, raised its 2018 revenue forecast for the second time since August thanks to a stronger-than-expected third quarter. The growth was driven by a combination of entering new markets and driving more sales in places where it already operates.
The company, which operates a business similar to Grubhub, plans to list on Nasdaq later this year after it is acquired by Landcadia Holdings (ticker: LCA), a blank-check company or SPAC that raised money to find a target. The last major hurdle is getting the majority of LCA shareholders who cast votes to approve the deal on November 15.
Investors who buy the shares now may get a better deal than those who hold out. While LCA shares are trading at an 8% premium to the value of the SPAC’s cash, they stand to rise much more if shareholders approve the deal.
Consider LCA’s valuation. If the deal goes through, investors who buy LCA now would own Waitr at an enterprise value, adjusted for cash, of $451 million. That’s a multiple of 6.8 times the midpoint of 2018 sales projections and 3.6 times 2019 projections. By contrast, Grubhub trades on multiples of 8.3 times consensus 2018 estimates and 6.3 times 2019 estimates.
Another recent vote of confidence in Waitr came a few weeks ago from Luxor Capital, a multi-billion-dollar hedge fund. Separate from the SPAC deal, Luxor agreed to provide an $85 million financing package consisting of a loan and convertible note.
As IPO Edge outlined in this recent analysis, Waitr has other advantages over Grubhub that should grab investors’ attention. For one, Waitr is growing much faster. The company forecasts revenue growth of 88% in 2019, versus consensus estimates for Grubhub of only 32%.
A key component of Waitr’s strategy is to enter markets where there is essentially no competition. The company, which expects to be in 45 markets by year end, sees another 200 potential markets in the southeast region where it focuses. That suggests it has at least a few more years of growth without encountering significant competition.
Even when competition inevitably shows up, Waitr holds its own. The company averages around 40% of third-party delivery sales in the markets where it operates versus less than 25% for the closest competitor, according to Waitr’s investor presentation.
The main risk for LCA investors is that the deal isn’t approved, in which case they’ll simply get $10 a share returned to them. With limited downside, investors who grab the stock now have a chance to be ahead of the game.
John Jannarone, Editor-in-Chief