According to the Wall Street Journal, Grubhub has hired an investment bank to help the company review its “strategic alternatives”. In Wall Street parlance, that means its very likely the company will reach out to potential suitors to evaluate appetite for an acquisition. Shares were up as high as 17% after the story broke and finished up nearly 13%.
It’s About Time: Grubhub shares have fallen over 60% since their high in mid-2018 amid stifling competition and weak economics in the food delivery space. In late October, Grubhub reported Q3 net income of just $1 million on total sales of $322 million. These razor-thin margins reflect the swelling marketing costs necessary to stay relevant (which also eat into profit). The
- Takeaway: Many analysts believe there are simply too many players in the space for healthy returns. Consolidation could help correct the overcrowded status-quo. The strategic review is reportedly still in the early stages and it’s uncertain if a transaction will materialize.