When is the bottom reached? At 30 euros? 20? 10 maybe? Investors in the Amsterdam meal platform Just Eat Takeaway (JET) have not dared to predict the low point of their share for months. JET’s share price has fallen by more than 80 percent in the past year and a half. This makes JET the worst performer of all companies in the Amsterdam AEX index.
On Wednesday, Jitse Groen’s company (turnover 2021: 5.3 billion euros) will present the figures for the past six months. The most important question is: how is the company going to get out of the trough? These are Just Eat Takeaway’s biggest problems.
Because central banks in the United States, the United Kingdom and Europe are raising interest rates again this year, investors are avoiding risk. Higher interest rates make saving relatively attractive again. This makes it less necessary for investors to get into relatively risky stocks.
As a result, investors are turning away from the already highly valued tech stocks, especially those that are not making a profit and are mainly focused on growth. This affects meal delivery companies such as JET and competitors, who are all having a hard time.
In the world of meal ordering sites, it’s hard to make money. Customers are accustomed to paying little for home food delivery and the costs for delivery companies are high. Especially for Just Eat Takeaway, which, unlike competitors Deliveroo and Uber Eats, does not pay deliverers per order, but per hour.
The competition is tough. Meal delivery is a winner takes allmarket, where often no more than one or two delivery companies survive per country. The idea: connect as many restaurants as possible, achieve the greatest possible brand awareness and ensure that you become the most popular delivery app and thereby make all other apps irrelevant.
To achieve that, JET is investing hundreds of millions in marketing: expensive commercials featuring pop stars like Katy Perry and Snoop Dogg and sponsoring major events such as the Champions League. Partly due to the high costs of marketing and delivery, JET is not profitable.
During the corona pandemic, the demand for meal delivery grew enormously, as restaurants that had to close their doors accelerated to deliver meals. It is now clear that the ordering sites cannot sustain that growth with the reopening of society. In addition, consumers are ordering less due to high inflation.
The combination of a difficult earnings model and declining growth makes Just Eat Takeaway a stock that investors are avoiding in these times of crisis, explains stock analyst Nico Inberg. “The stock price is a prediction of future profits, but investors have serious doubts about the revenue model of Just Eat Takeaway and other meal delivery companies,” he says. “The prospects for these companies are bleak.”
The biggest headache file for Groen: the struggling American meal delivery company Grubhub, acquired by JET last year for 6.4 billion euros.
The purchase of the third-largest meal delivery company in the United States was the opportunity for JET to compete in the American market. In retrospect, the timing proved unfortunate: Grubhub was unable to keep up with its two competitors (DoorDash and Uber Eats) during the pandemic. In addition, JET was confronted with a legal limit that food delivery companies in different regions can charge restaurant commissions. This according to Groen “unconstitutional” measure cost Grubhub tens of millions.
Grubhub has since been put back on the shelf under pressure from JET’s shareholders. Depending on the sale price, JET may have to take billions in losses. For Groen, the situation with Grubhub is “very difficult”, says Inberg. “Everyone says, ‘Jitse, you have to sell Grubhub,’ but you don’t want to give that company away for an apple and an egg.”
A stroke of luck: Grubhub recently closed a lucrative deal with Amazon, giving 200 million subscribers of Amazon’s delivery service Prime access to Grubhub. According to The Wall Street Journal Grubhub’s deal already brought in two million new subscribers for the new Grubhub+ delivery service in just a few weeks. For Amazon – which has the ambition to deliver everything, including meals – an acquisition of Grubhub could be an interesting option.
Also read the interview with Jitse Groen (2020): ‘You can’t beat us anymore’
JET’s share price is now so low that the company threatens to fall prey to short sellers: investors who speculate on a falling price and thus send the share down in a negative spiral. Major funds like BlackRock and Marshall Wace recently expanded their short positions, pushing the stock further down.
These negative dynamics can lead to Just Eat Takeaway shares becoming so cheap that the company is easier to take over. JET now has a market capitalization of about 3 billion euros, only half of what it paid for Grubhub a year ago.
The question is who could or would want to buy JET. Acquisitions by US competitors such as DoorDash or Uber could raise US competition concerns due to JET’s stake in Grubhub. Against a takeover by the German competitor Delivery Hero, JET is protected at least until April next year, on the basis of dates created during JET’s 2018 acquisition of Delivery Hero’s German delivery business.
Perhaps Prosus, which is listed on the Amsterdam stock exchange, wants to buy Jitse Groen’s company. The tech investor has been trying to compete in the meal delivery market for ages and has enough money.
Until recently, Jitse Groen was the unthreatened CEO of the company he founded in 2000 under the name Thuisbezorgd. Under his leadership, it grew into the second largest meal platform in the world. Only the Chinese Meituan is bigger.
Groen is known as a leader with good instincts, who sticks to principles and is difficult to coach or advise. Now that his company is struggling, shareholder criticism of Groen’s leadership style is also growing.
During the last shareholders’ meeting, in May, this led to an open confrontation between Groen and Pieter Taselaar, whose hedge fund Lucerne Capital then owned about half a percent of the shares of JET. Taselaar had spoken to Groen just before in an interview with NRC called “megalomaniac and stubborn.” During the shareholders’ meeting, Groen reacted irritated to a question from Taselaar. “I first read about you in the newspaper. How can you say management doesn’t listen to you when we barely know each other?”
That meeting in question has caused bad blood among shareholders. For example, Pieter Taselaar announced that he had sold all his shares after the collision with Groen. “Actually, Jitse should hire someone to tell him how he communicates with the market,” says Inberg. “The shareholders are the people who can make or break it.”
‘I am very disappointed in JET’
“I started JET about a year and a half ago. That was at the peak, when the exchange rate stood at 110 euros. There was a lot of potential in the stock, but then the rumors started that they wanted to buy Grubhub in the US. They are going to spend way too much money way too soon, I thought. During the shareholders’ meeting, I was one of the few to vote against the takeover. I was proved right as it has only gone downhill since then.
“I actually wanted to get rid of the share, but my position was already so big that I thought: I’m not going to sell at a loss now. Then I started buying more to lower my average purchase price. You are in a downward spiral that you cannot easily get out of.
“I am very disappointed in JET. Actually, since the course has gone downhill, management communication has been non-existent. Why not at least say that it is an unpleasant situation or show understanding? It’s so easy to take away some concerns and create a little more understanding.
“I understand that shareholders say: I’m done with it, I’m stopping. I’ve decided to stay, for the longer term. I think that is also part of investing: a price can simply do all kinds of things that you do not take into account. Moments like these determine what kind of investor you are.”
“The loss hurts. You think: will this still be okay?’
“On December 1, I responded to a tweet from Jitse Groen, who made an appeal for deliverers. “You would almost do that to get rid of the loss of the price drop,” I wrote. I didn’t expect him to send anything back, but he did. “It’s okay Gerard. We do the right things’he tweeted. That phrase is now continuously used against him on forums and social media.
“I started investing in Just Eat Takeaway in January 2021 and started investing at around 80 euros. I got out in September, only to make another purchase afterwards. The free fall started soon after. With every 5 euros that went off, I bought more. After Jitse’s tweet, I bought again. That also gave me confidence that the CEO sent me such a message.
“I am now in it for 29,000 euros. Even at 30, 25, 20 euros, I kept getting in again. You always think: it can’t get any lower and you average your purchase price. Now I have the feeling that under the current market conditions a price of 10 euros would not surprise me. The loss hurts. I try to let it go and not look at it all day, it can be very addictive. It’s a kind of casino.
“As a person, Jitse can manifest herself more positively. In an interview with Humberto Tan he said: I don’t need a coach. I thought: everyone needs a coach, even if you are King Willem-Alexander. ”
JET says it has no need to respond to the interviews