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The food delivery company is exploring a possible sale, according to reports.
Topline: Shares of GrubHub surged nearly 20% on Wednesday—before paring back gains slightly—following news that the company is exploring a possible sale, as it continues to buckle under pressure from competitors like Uber Eats, DoorDash and Postmates, the Wall Street Journal first reported.
- GrubHub, which also owns Seamless, has reportedly hired financial advisers to explore strategic options. The company is in early stages of discussions that could include a potential sale or even an acquisition.
- The company has struggled amid increased competition in the food delivery space from the likes of Uber Eats, DoorDash and Postmates, which has caused its shares to decline steeply from 2018 highs.
- GrubHub currently has a market value of around $4.5 billion, which is down dramatically from its high of more than $13 billion over a year ago.
- If GrubHub does pursue a deal, it could end up merging with one of its big rivals in order to survive in a food delivery industry that has become further saturated with competition from newcomers trying to attract customers with discounts and promotions.
- Matt Maloney, GrubHub’s chief executive, told the Wall Street Journal last October that the industry is “in a weird bubble that is about to burst,” especially as private investors have become more skeptical of startup valuations in the wake of WeWork’s cancelled IPO.
- Wall Street analysts have argued that the budding industry is in need of consolidation with many speculating that there isn’t room for more than two major players, according to the Wall Street Journal.
Crucial quote: “We do not comment on market rumors or speculation,” a GrubHub spokesperson told Forbes.
Key background: GrubHub’s strategic review also comes on the back of a dismal earnings report last quarter. The company cited slowing order frequency, decreasing customer growth and higher marketing costs in order to keep up with incentives offered by rival services. The company was forced to drastically cut its revenue and profit forecasts, sending shares down 43% a day after earnings, though the stock has since regained some of those losses.
Tangent: News that GrubHub may be sold sent Uber shares higher by almost 4% as investors see further industry consolidation as a positive. DoorDash and Postmates, which are still privately held, have both explored the idea of a stock market listing.
GrubHub stock performance over the last two years.
Big number: GrubHub shares fell nearly 38% in 2019, as the company struggled amid fewer new customers and industry competition that ate into its financial results.
Further reading: GrubHub’s letter to shareholders in October, following the poor earnings report last quarter.
