Friday 17 May 2019 9:31 am

Just Eat shares fall after Amazon leads $575m investment round in rival Deliveroo

Just Eat shares fell eight per cent this morning after Amazon led a $575m (£450m) investment round in rival Deliveroo.

Read more: Deliveroo to 'invest heavily' in London tech with Amazon's £450m

Just Eat's shares dropped 8.3 per cent to 621p in early trading after the fund raising.

Analysts at Peel Hunt said that the Amazon investment in Deliveroo, coupled with Uber’s initial public offering (IPO) last week, increased the pressure on Just Eat.

“After Uber’s IPO last week that raised $8.1bn and now Amazon’s investment today – both in aid of the more expensive delivery side of the takeaway market – these two FAANG(U)s will put more pressure on Just Eat which has only recently started out on that journey,” analysts said.

Germany’s Delivery Hero and Dutch offering Takeaway also saw shares slide six per cent today.

However, analysts at Liberum said fears were overdone, arguing that Just Eat’s dominant position would be hard for rivals to overcome.

“Just Eat's market leading position will be incredibly difficult to overcome, especially given its strength in smaller towns. What we do think is more likely than a serious threat from competitors is that Just Eat – and the other portals – are bought by bigger players looking to dominate the food delivery portal market,” they said.

Deliveroo’s investment round, including money from existing investors Fidelity Management, T Rowe Price and Greenoaks, takes its total capital raised so far to $1.53bn.

“We’re impressed with Deliveroo’s approach, and their dedication to providing customers with an ever increasing selection of great restaurants along with convenient delivery options,” said Doug Gurr, Amazon UK country manager.

Read more: Can Just Eat deliver the City what it wants?

In December, Amazon closed down its own UK restaurant delivery business after two years of operations.

“With Amazon pulling out of its restaurants offering in the UK at the end of last year, today this FAANG has demonstrated its view that Deliveroo is a better place to put its money. While Deliveroo is still in its pre-profit (strategically loss making) phase, as it invests for growth, if any company knows about the benefit of that strategy it is Amazon,” Peel Hunt analysts said.