Selloff for GrubHub After Filing for New Stock Offering

The online food ordering company will offer 1 million new shares, which caused investors to sell.
3:00 | 08/25/14

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Transcript for Selloff for GrubHub After Filing for New Stock Offering
I'm -- Donnie and Washington as Wall Street closes on Monday August 25. This is story stock. Today a look at the -- the hub of the online food delivery company in -- -- something new on the many to its investors today something that Wall Street promptly sent back to the kitchen. And here with all -- the tasty. Rick thanks for joining us -- us talk us through what -- -- did and how investors reacted. Sure they made a filing with so with the government saying they planned to sell about an additional ten million shares are so. About one million of those would be new shares of the other nine million would be shares that are. Held by insiders that CEO and some of the early investors. And the problem with that is that's gonna raise the share count from about seventy million shares to about eighty million. Which essentially just devalues all the shares that are on the market so the company. Is worth the same but the company's value now needs to be spread across more shares -- That's why we saw about a 9% decline in the stock today it's almost just simple math the more shares -- put out the less he shares worth and that obviously she's kind of unfair to. The current shareholders. So let's just take a look at the two day stock chart which graphically illustrates the sell -- can you walk us through that. Yeah sure I mean Wall Street didn't see this coming. It's it's it's not unusual. For the owners of a company the early investors and so forth to sell their shares. When the lock up period for for a company is over group. -- hubs lock up period what doesn't expire till September 30 so that's after that after that is when you think is what happened but. There's a clause -- -- along with the IPO that does allow them to sell the shares not a little bit unusual so Wall Street just didn't see it coming I think and that's why we've got this big drop in the stock they went into one of the biggest decliners for the day for sure. And up until today Gregg -- had to -- hub had pretty much seen nothing but investor confidence right. This has been a good IPO it's. It's in the business makes sense what -- -- does -- but this other company seamless which was a competitor doing -- did basically same thing. You just you can order take out food or delivery using an app on your Smartphone or just do it over the Internet so you do that instead of calling into the company cost nothing if you are the if -- -- the consumer -- I think they make their money on -- today restaurants. It's this kind of oh a win win type of business so expect good prospects it's not really -- sort of an also ran business is pretty innovative. I think it seems like the kind of business that's going to be around for awhile so operationally. Company seems pretty sound and -- I think what we've seen today. Doesn't really tell us is any problem with the company -- if not a fundamental problem me sometimes when insiders sell shares. You start to think yourself -- did they know about problems I'm not aware of in this case the insiders are selling some shares. Answer it so it's a couple of big investors who want to get some of the profits from their investment. And in a lot of those desires are gonna continue to hold some. A lot of shares actually including the CEO so it does seem like the companies in pretty stable shape which is gonna devalued -- the shares that are -- on the market. Rick. -- with Yahoo! finance thanks so much for joining us. You've been watching this story stock stay with ABC's news.com for your latest headlines I'm -- -- in Washington.

This transcript has been automatically generated and may not be 100% accurate.

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