Amazon announced during its July Prime Day sales event that it is taking a 2% stake in Grubhub and plans to offer the service to its Prime members for one year. Investors view the arrangement as bad news for rival DoorDash and are selling the stock today as a result. Year-to-date (YTD), DASH stock is down 50% at $74.90 per share.
What Happened to DASH Stock
Amazon said Prime members will receive free Grubhub delivery on orders over $12 for one year. In exchange, Amazon will receive warrants representing 2% of Grubhub’s shares, with an additional 13% of shares available to it conditional on the deal bringing Grubhub a sufficient number of new customers.
The deal is a success for Just Eat Takeaway, Europe’s largest food delivery company. Its shareholders have demanded in recent months that the company either sell itself or find a partner for Grubhub, which it bought last year for $5.8 billion. In a news release, Just Eat Takeaway said that it continues to “explore the partial or full sale of Grubhub.”
Why It Matters
The deal between Amazon and Grubhub is seen as a win for both companies, as well as Prime members who will benefit from a year of free delivery. However, the deal is seen as a threat to food delivery rivals such as DoorDash. Amazon Prime has more than 200 million members worldwide, including nearly 150 million in the U.S., according to industry data.
DoorDash has struggled coming out of the pandemic, and its share price has continued to trend lower as a result. Investors clearly see that the deal with Amazon gives Grubhub a competitive advantage going forward.
What’s Next for DASH Stock
DASH stock is taking a hit today as investors and analysts digest the implications of the partnership between Amazon and Grubhub. While the deal might be bad news for food delivery rivals such as DoorDash, it is a clear win for Amazon Prime members, who will benefit from free food delivery for the next year.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.