The business niche Deliveroo operates in has many rivals, with the biggest including Delivery Hero.
The shares of British online food delivery company Deliveroo PLC (LON: ROO) is trending upward today on the news that German rival, Delivery Hero SE (ETR: DHER) has taken up a 5.09% stake in the business. According to a CNBC report, the Delivery Hero stake is valued at about £400 million and was made at the last trading day of the past week.
While the exact size of the investment is not confirmed, Deliveroo unveiled in a note to its investors that it received a notification “of major holdings in the company’s shares from Delivery Hero after market close on 6 August 2021.” The investment showcases the trust by Delivery Hero on the business potentials of Deliveroo which has grown to dominate the UK food delivery markets.
The company was founded in 2013 by Co-Founders, Will Shu and Greg Orlowski and the business has grown to operate more than 200 locations across Europe, Australia and Asia. In terms of financials, the company has an approximate market value of £8 billion. The firm accrued as much as £4.1 billion in revenue in 2020, however, it came down with a loss of £223.7 million in the same financial year.
This performance is a boost when compared to the £317 million it lost on £2.5 billion of revenue in 2019, despite the impacts of the COVID-19 pandemic. With recovery underway, as well as improved capital liquidity from Delivery Hero, the company is on track continue to chart new growth pace for itself in coming quarters.
Investors are geared up, sending the ROO stock up 7.85% to £350.63 per share. This price level is the highest range the stock has traded in the past 1 month.
Deliveroo Shares amid Reduced Business Rivalry
The business niche Deliveroo operates in has many rivals, with the biggest including Delivery Hero. While the former firm dominates markets in the UK which is its primary domain, Delivery Hero has often proven to be a formidable competitor in other top regions where both firms operate.
Through its Foodpanda subsidiary, Delivery Hero competes with Deliveroo in Hong Kong and Singapore while it uses the Talabat offshoot to fight for market share in the Middle East. The competition in the UK was tampered down as Delivery Hero sold out its UK subsidiary HungryHouse to Just Eat for £200 million about 5 years ago.
The stakes in Deliveroo might help reduce every form of aggressive competition between both firms as the growth of the London food delivery giant will also benefit the German entity. The path to success has been cemented by the accrued funding the firm has received from investors over the years includingAmazon.com Inc (NASDAQ: AMZN).
The recent share jump help retrace the downward trend of Deliveroo which lost as much as 30% on its first trading day back in March.
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