DoorDash shares tumble as Amazon takes stake in Grubhub

FOOD delivery company DoorDash shares sank on Wednesday (Jul 6) after Amazon.com agreed to take a stake in rival Grubhub's business.

The San Francisco-based startup tumbled as much as 11 per cent in New York trading, taking the stock down more than 70 per cent from the highs touched in November. Ride-hailing service Uber Technologies, which also has a food-delivery unit, fell over 4 per cent.

This latest move by Amazon further lowers the odds of a food-delivery duopoly for Uber and DoorDash in the US, Bloomberg Intelligence (BI) analyst Mandeep Singh wrote in a note.

The Grubhub deal is part of a partnership where Amazon will offer US Prime users a 1-year membership to the food delivery service. Grubhub is owned by Just Eat Takeaway.com, whose shares surged in Amsterdam on Wednesday.

"Amazon.com's stake in Grubhub looks similar to its expansion in the UK food-delivery market with its share of Deliveroo and is undoubtedly going to pressure order-volume growth for Uber and DoorDash," BI analyst Singh said.

The rout in DoorDash's stock this year has come as the severity of the pandemic waned and people started stepping out, weighing on demand for online food delivery. In addition, investors have also been moving away from unprofitable, riskier assets in favour of safer havens in the face of a looming recession. BLOOMBERG