GrubHub, Inc. (GRUB) Suffers As Market Dominance Declines
According to the complaint for alleged violations of the Securities Exchange Act of 1934 between July 30, 2019 and October 28, 2019, for many years, Grubhub, Inc. (GRUB) dominated the online delivery market, controlling approximately 40% of the market in early 2018. However, Grubhub’s dominance did not go unchallenged for long, as competitors like DoorDash and Uber Eats entered the online food delivery space with aggressive marketing tactics that attracted diners and restaurant partners and diminished Grubhub’s dominant market share. Due to significant private capital and outside revenue sources, these competitors had the capacity to provide deep discounting with astoundingly low delivery fees, igniting a “price war” within the industry. In a futile attempt to compete, Grubhub convinced restaurant chains to enter into exclusivity deals, claiming to investors these would allow the Company to attract “high-quality” customers and dismissing “any data that suggest using multiple different services or different apps.” Ultimately Grubhub’s inability to compete became clear on October 28, 2019, when it announced deeply disappointing financial results, slashing its 2020 EBITDA by more than 70% below market expectations, citing the propensity of its customers to use competing platforms. On this news, Grubhub’s stock fell $25.28, more than 40%, to close at $33.11. The stock still has yet to recover.
