Hedge funds have ramped up their bets against FTSE 100 giant Just Eat in recent months as they look to cash in on shareholder disruption and a slowdown in growth at the online takeaway player.
The food delivery firm, which has been facing investor unrest in recent months as it fights to protect its market share against the rise of Uber and Deliveroo, is becoming an increasingly popular target among short-sellers, who look to capitalise on a company’s woes by speculating that its share price will drop in the future.
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Roughly six per cent of its shares are currently on loan to shortsellers, creeping up from four per cent at the start of 2019 and rising from zero since the summer, with Crispin Odey’s investment vehicle among the hedge funds taking aim at the firm.
Alex Captain of activist shareholder Cat Rock Capital Management, which has been urging Just Eat’s management to pursue tie-up talks with a peer such as Takeaway.com, told City A.M. that the board "urgently needs to secure leadership with online food delivery experience and evaluate mergers with well-run industry peer".
Captain, the founder and managing partner at Cat Rock, said: "Shortsellers are betting that Just Eat will not pursue strategic alternatives or secure world-class management with online food delivery experience. I hope the board chooses to prove them wrong."
"We strongly believe in the fundamental strength of Just Eat’s business. Consumers enjoy better selection and lower delivery fees on Just Eat’s platform than they do on UberEats and Deliveroo. Just Eat has a customer base that is multiple times the size of that of its competitors. Market leadership is clearly Just Eat’s to lose."
The comments are likely to add pressure to the blue chip company’s board ahead of its annual general meeting (AGM) on Wednesday, which follows on from quarterly results last week that showed UK growth had slowed from 13 per cent in quarter four of 2018 to 7.4 per cent in the first three months of this year, falling below analyst expectations.
Shares in the company have been on a roller-coaster ride in the last year, hitting highs of 883p before crashing to lows of 533p and then recovering to 714p, marking a seven per cent drop overall in the last 12 months.
In January chief executive Peter Plumb stepped down with immediate effect after just 18 months at the helm at the helm of the company, with chief customer officer Peter Duffy filling in on an interim basis as the firm continues to search for a new boss.
Russ Mould, investment director at AJ Bell, said: "Last week’s disappointing first-quarter results will have provided bears of the stock with some encouraging (from their perspective) food for thought. Management’s bid to blame hot weather and the timing of Easter is unlikely to convince short-sellers that they are on the wrong track, especially as the company is locked in a fight for customers’ attentions with deep-pocketed rivals such as Uber Eats and Deliveroo."
Neil Wilson, chief market analyst at Markets.com, added: "I think Just Eat is at a big crossroads and costs are mounting without necessarily getting the returns in terms of growth. In fact the pace of growth is slowing and this combined with investing in growth is not a good place to be."