Just Eat share price sinks as Amazon invests in Deliveroo

Shares in Just Eat (LON:JE) have fallen deep into the red in London this morning as it emerged that e-commerce giant Amazon was set to invest in rival Deliveroo. The news prompted Liberum to comment that the investment would raise concerns over the FTSE 100 group’s business model.

As of 08:49 BST, Just Eat’s share price had given up 8.29 percent to 621.60p, weighing on the benchmark FTSE 100 index which currently stands 0.44 percent lower at 7,320.80 points. The group’s shares have lost more than 23 percent of their value over the past year, as compared with a near six-percent fall in the Footsie.

Amazon to invest in Deliveroo

Just Eat’s shares have come under pressure as Sky News reported this morning that Amazon was close to announcing a deal to back Deliveroo as part of a $575 million (£450 million) fundraising. Sources told the newswire late last night that the deal was likely to be unveiled by Deliveroo in the coming days.

The BBC meanwhile quoted that Deliveroo founder and chief executive Will Shu had said he was looking forward to working with ‘such a customer-obsessed organisation’ like Amazon.

Analysts weighs in on Just Eat

Proactive Investors quoted Liberum as commenting that Amazon’s investment in Deliveroo would raise concerns over the FTSE 100 group’s business model. The broker, however, reaffirmed its ‘buy’ rating and target of 1,360p on the Just Eat share price, saying these concerns were ‘overdone’ as despite Amazon’s backing for Deliveroo, Just Eat’s dominant market position would be “incredibly difficult to overcome, especially given its strength in smaller towns”.

Proactive Investors, however, also quoted Peel Hunt as noting that Amazon’s investment in “the more expensive delivery side of the takeaway market” would put pressure on Just Eat as it had not developed its own delivery offering as fully as its competitors.