Just Eat Takeaway.com’s (JET) second largest shareholder Cat Rock Capital Management has urged the announcement of a sale or spin-off of Grubhub by the end of the year.
Cat Rock Capital, which holds approximately 13.8 million shares in the capital of Just Eat, sent a letter to the JET management board with the request in order to address the “the deep and damaging undervaluation of the Company’s equity.”
“We were pleased to see Just Eat Takeaway.com present a clear, data-driven vision for its business at the recent Capital Markets Day,” Cat Rock Capital Management founder Alex Captain said in the letter.
“Moreover, we were encouraged to hear that JET management views consolidation in the US market as ‘inevitable’ and that they intend to participate.
“However, JET management failed to fix the deep and damaging undervaluation of its equity by taking tangible action to unlock the value of its portfolio.
“A deeply depressed stock price poses a real risk to JET’s business, limiting its financial and strategic flexibility, inviting competitors to invest in its markets, and leaving the Company vulnerable to takeover bids well below its long-term intrinsic value. JET must take substantive and immediate action to solve this valuation problem.”
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The letter goes on to say that Just Eat has a means of solving its valuation issues by selling or spinning-off Grubhub.
“Fortunately, JET management has an obvious and actionable lever to quickly solve its valuation problem and refocus its business – selling or spinning-off Grubhub. JET’s stock appreciated +329 per cent from its 2016 IPO to the day before the Grubhub acquisition announcement in June 2020, dramatically outperforming the market,” the letter continued.
Since announcing the Grubhub purchase just 16 months ago, JET stock has underperformed the MSCI World Index by a remarkable 69 per cent.”
Capital Rock underlined the importance of the logic in selling Grubhub by adding that “the industrial and financial logic for a Grubhub sale or spin-off as a precursor to a sale could not be clearer. Moreover, JET management must act quickly” in order to avoid long-term damage to the brand.
“We have supported Jitse Groen and his management team for over four years as shareholders of JET and its predecessor companies,” the letter read.
“We believe they are clever, aligned, and entrepreneurial operators, and we do not believe that they will seek to save face instead of taking decisive action to improve the business.”