My experiences through GrubHub's IPO from start to finish

Very interesting and educational read. Even if you know a little bit about how IPOs work, reading through the complete timeline helps understand the roles and the steps involved.

One question that came after reading:

    The underwriter won’t move forward unless they get a very
    high percentage (99-100%) of employees/shareholders to sign
    a lock-up.

What are the incentives for employees to sign such an agreement? It sounds like the only point in the process where an (organized) group of employees could have some leverage?

Re: My experiences through GrubHub's IPO from start to finish

#7

Post by jackgavigan » Mon, Feb 09, 2015, 5:20 PM UTC

It's a pity he doesn't talk about how the stock was priced. GrubHub closed up 31% the day it IPO'd, which means that they left $59.2m on the table.

Re: My experiences through GrubHub's IPO from start to finish

#8

Post by wtvanhest » Mon, Feb 09, 2015, 5:33 PM UTC

psuter wrote: post #6

Very interesting and educational read. Even if you know a little bit about how IPOs work, reading through the complete timeline helps understand the roles and the steps involved. One question that came after reading: The underwriter won’t move forward unless they get a very high percentage (99-100%) of employees/shareholders to sign a lock-up. What are the incentives for employees to sign such an agreement? It sounds…

I have very limited experience with this, but when I signed our corporate formation documents, the lockout was written in the restricted stock agreement.

It is likely agreed on before employees every start their first day of work.

Re: My experiences through GrubHub's IPO from start to finish

#9

Post by chollida1 » Mon, Feb 09, 2015, 5:40 PM UTC

psuter wrote: post #6

Very interesting and educational read. Even if you know a little bit about how IPOs work, reading through the complete timeline helps understand the roles and the steps involved. One question that came after reading: The underwriter won’t move forward unless they get a very high percentage (99-100%) of employees/shareholders to sign a lock-up. What are the incentives for employees to sign such an agreement? It sounds…

I'll start by saying I'm not surprised employees get the shaft as I've spent countless hours analyzing the IPO process looking for trading advantages and I still don't fully understand it:(

Quite often the choice of a lockup is out of the companies hands, many states require it. The SEC however doesn't require a lock up, they just recommend it.

http://www.sec.gov/answers/lockup.htm

http://www.sec.gov/answers/bluesky.htm

I'm guessing most companies include language about this when you join and get your first option grant. They usually don't go around to each employee and get them to sign something before an IPO as their initial grant language often covers this. if they do please let me know:), Actually I take that back, that would probably be insider knowledge, please don't tell me:)

Rule 7-G http://www.law.cornell.edu/cfr/text/17/230.701 covers this if you feel like reading some really dry material:)

It is possible for the company to file an S-8 registration form to allow some shares to be sold but many companies don't file this form.

Here is a good paper on analyzing the trading of locked up shares.

http://pages.stern.nyu.edu/~eofek/PhD/papers/FH_The_JF.pdf

Re: My experiences through GrubHub's IPO from start to finish

#10

Post by lmm » Mon, Feb 09, 2015, 6:05 PM UTC

psuter wrote: post #6

Very interesting and educational read. Even if you know a little bit about how IPOs work, reading through the complete timeline helps understand the roles and the steps involved. One question that came after reading: The underwriter won’t move forward unless they get a very high percentage (99-100%) of employees/shareholders to sign a lock-up. What are the incentives for employees to sign such an agreement? It sounds…

The IPO is presumably good for the share price (and indeed the ability to sell the shares at all, even after a 3- or 6-month lockup) - it gives employees with shares the chance to cash out just like any other shareholder. And the importance of your signature on the agreement is directly proportional to how many shares you own.