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Feast Or Famine: Grubhub Needs Uber Merger

J. Ryan Cameron profile picture
J. Ryan Cameron


  • Grubhub needs to complete a merger with a large competitor to combat poor market dynamics and financial results.
  • The food delivery industry is ripe for a price war, and Grubhub is especially exposed.
  • Rapidly declining margin per order means Grubhub needs to aggressively cut overhead to restore profitability.

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Grubhub (GRUB) desperately needs to complete a merger to ensure its long-term viability. Luckily, Uber (UBER) has reportedly been in merger discussions with Grubhub, but a deal is far from done. Grubhub’s CEO has said that Uber’s offer price is too low, and there is speculation that a merger between these two food delivery giants could spur significant regulatory scrutiny. That being said, Grubhub’s longevity as a key player in the growing $94B food delivery market is hinged on its ability to consolidate with a competitor, such as Uber Eats, in order to survive the industry’s fierce competitive dynamics and the poor scalability of its business model. Investors would be wise to keep an eye on the merger’s developments, and if a deal can’t be reached, they should sell the stock as quickly as they can.

Since March 21, Grubhub’s stock price has soared over 75%, primarily based on the news of a potential merger with Uber. Uber’s most current offer values Grubhub at approximately $65 per share. For a stock that was trading near $30 per share as of the end of March, Grubhub investors should be cheering at this offer price. However, Grubhub’s CEO has balked at the offer and is greedily asking for more during a time when Grubhub’s fundamentals are faltering.

Source: Yahoo! Finance stock charts

The food delivery business is becoming increasingly unattractive as aggressive competition builds in an industry that requires billions of dollars of marketing spend per year to stay top of mind with consumers. It is

This article was written by

J. Ryan Cameron profile picture
I love following the markets and have been investing for over a decade. I have previously worked in corporate valuation and investment banking, as well as in investment management at Merrill Lynch. Currently, I am wrapping up my MBA at the UCLA Anderson School of Management where I have specialized in Corporate Strategy and Finance. I also graduated from UCLA with a bachelor's degree in Economics.Disclaimer: All perspectives are solely my own, and I urge investors to always conduct their own due diligence and contact their own financial advisors prior to making any investment. All material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (12)

they need someone but dont have to be uber
I guess they didn’t need Uber after all...
Anthony Cataldo profile picture
I was holding 3K sh and sold some at the money calls. Hope to get a call out in the AM.
Anthony Cataldo profile picture
Just bought 1,800 sh.
Could be wrong, but I like the odds.
Di you buy GRUB or UBER??
Anthony Cataldo profile picture
Sold Friday out-of-the-money calls.
tjf@denver profile picture
Uber better grab some grub ... dinner is being served
blacky_ profile picture
Not sure if both companies would fail faster together or as separate entities, the cash burn will remain in any case.
uber is losing money uber needs merge or bankrupt
Greed is going to destroy GrubHub and if they don’t be grateful someone wants to buy them out and take the offer they’re finished. Sad they’re trying to take Uber with them in the process. What good is a break up fee if the money will be spent in a few months and they’ll still pass along anyway. No amount of money Uber can offer them incase of a block will save them in this climate and they have to understand that. They don’t generate anything.
02 Jun. 2020
Waiter is next in line
A comparison of grubhub with other providers like doordash / ubereats in terms of market share/ profitability could have made this article more meaningful.
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