Home » Stocks & Shares » Amazon lends significant funds to the UK based food delivery startup, Deliveroo, to avoid a cash crunch

Amazon lends significant funds to the UK based food delivery startup, Deliveroo, to avoid a cash crunch

Michael Harris
  • January 14th 2020, 22:32
  • Last Updated: January 14th 2020, 22:39
  • Amazon lends funds to the UK based food delivery startup, Deliveroo, to avoid a cash crunch.
  • Britain’s CMA launched a probe into Amazon’s purchase of Deliveroo’s stake.
  • Amazon helped Deliveroo raise $575 million in funds in May 2019.
  • Amazon showed interest in the Indian food delivery market to compete against Zomato and Swiggy.
  • Justin Post of the Bank of America has a strong buy rating on Amazon with a target price of $2,330.

According to Bloomberg’s report on Tuesday, the online retail giant, Amazon, has stepped up to support the UK based food delivery startup in times of trouble. The startup recently faced a probe into its previous funding round that highlighted a risk of an imminent cash crunch. As of Tuesday, however, Amazon has announced its plans of offering a significant loan to the startup to help sail it out of troubled waters.

CMA Launched A Probe Into Amazon’s Purchase Of Deliveroo’s Stake

Britain’s Competition and Markets Authority (CMA) had instigated a thorough investigation in December that sought insight into Amazon’s investment in Deliveroo. The probe was launched after Deliveroo failed to satisfy the CMA on its original concerns. The food delivery startup had till December 18th to respond to the CMA queries.

As per the sources, the exact amount that Amazon has lent to Deliveroo is not yet known. However, it is evident that the company now has sufficient funds to expand its operations. Bloomberg’s report further highlighted that upon receiving CMA’s approval, the loan is likely to be turned into equity.

In May 2019, Amazon was reported to have helped Deliveroo raise $575 million in funds with which it expected the startup to pose a serious challenge to the dominating players of the UK’s food delivery market including Takeaway.com, Just Eat, and Uber Eats. By the end of 2018, Deliveroo was left with a much lower £185 million in funds, as per the report.

Sources also informed that Deliveroo has refused to comment at this stage while Amazon is yet to comment as well.

Amazon To Enter Indian Food Delivery Market And Compete With Zomato And Swiggy

Amazon had previously shown interest in entering the food delivery niche in India and competing against the giants like Zomato and Swiggy. The rising interest of Amazon in Deliveroo may just be its next move towards making its mark in the European market and challenging the dominance of Takeaway or Uber Eats.

As of Monday, Amazon is exchanging hands at $1,869.44 in the stock market that values the Seattle based e-commerce giant at $926.86 billion. This, however, marks an around 10% decline for the tech company as compared to its record high of around $2,050 in July 2019. Justin Post of the Bank of America has a strong buy rating on Amazon’s stock with a target price of $2,330 following its next earnings report in the upcoming months.

About the author

Michael Harris
Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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