What happened

Shares of Grubhub (NYSE:GRUB) were up more than 5% in late afternoon trading Wednesday as it rode the coattails of the initial public offering of DoorDash (NYSE:DASH), which itself soared 80% on its debut.

So what

DoorDash hitting the market caused the whole sector to rise, with Uber Technologies (NYSE:UBER) and Lyft (NASDAQ:LYFT) also spiking higher initially, though all three rivals to the food delivery leader ended up giving back a good portion of their gains.

Grubhub employee with delivery bag

Image source: Grubhub.

Grubhub agreed to be acquired earlier this year by Amsterdam-based Just Eat Takeaway.com (NASDAQ:GRUB) in an all-stock deal valued at $7.3 billion. Its stock is largely trading in line with the valuation of the buyout.

Now what

The coronavirus pandemic created a boom in consumer demand for third-party delivery providers, though the ability to make a profit is still hit or miss for most companies.

The merger with Just Eat Takeaway is expected to be completed by the end of next year after the deadline for completion was extended from the original closing date of June 10, 2021. There were no reported problems with the acquisition; both parties just wanted to ensure they had plenty of time to finish it.

Even so, a year is a long time, and investors may be antsy about the big spike in valuation DoorDash received with its IPO. It priced its stock at $102 per share, well above the expected range, and opened for trading at $182 per share.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.