The shareholder is one of the food delivery group’s biggest shareholders, with a 6.5% stake.
It said that JET’s management “failed to fix the deep and damaging undervaluation of its equity by taking tangible action to unlock the value of its portfolio” at the recent Capital Markets Day.
Cat Rock in July called on JET to look at strategic options including sales or a merger with another rival, adding that if nothing is done the company could be vulnerable to a cheap offer.
Today, the investor noted that while JET’s share price had appreciated 329% from its 2016 IPO to the day before the Grubhub acquisition announcement in June 2020, since buying the US business 16 months ago the stock has underperformed the MSCI World Index by “a remarkable 69%”.
“Assuming equity performance consistent with the MSCI World Index, JET’s current valuation embeds negative EUR14bn of value for acquiring Grubhub, vastly exceeding the EUR6.5bn purchase price for the asset. We believe a Grubhub sale or spin-off at any positive valuation could drive over 100% appreciation in JET’s stock as it returned to its historical rating,” said Alex Captain, Cat Rock’s founder and managing partner.
He added that the market is “wrong” to attribute negative value to Grubhub, which has US$10bn of gross merchandise value, over 300,000 restaurant partners, coverage of over 4,000 US cities, and a same-day logistics network that delivers 68% of its orders.
“Grubhub is the only credible path for US online grocery businesses such as Amazon, Walmart, and Instacart to match the converged online food and online grocery offerings of DoorDash and UberEats. There is no question that a combined online food delivery and grocery app offers a far better consumer proposition than either service alone,” continued Captain.
“For example, a partial or complete Grubhub sale to Amazon Whole Foods at any valuation would significantly improve the consumer proposition for both companies and dramatically increase competition in the US online food delivery market by providing Grubhub with the resources to credibly compete against the massive, converged US businesses of DoorDash and UberEats.”
Captain said that if a sale or spinoff doesn’t go ahead by the end of the year, “it will be clear… that JET management cannot move quickly and decisively enough to compete in a fast-paced sector such as online food delivery”.
Shares were flat at 5,748p on Monday at noon.