Liquid Alternatives: The Uber Vs. Grubhub Food Delivery War – ETFs to Profit

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If successful, Uber’s play for Grubhub would be a gamechanger for the food delivery sector.

The Wall Street Journal revealed Tuesday that Uber (NYSE: UBER) is pursuing a takeover of food delivery service Grubhub (NYSE: GRUB) in an all-stock deal. In fact, talks started earlier this year, and according to Bloomberg, the deal could be consummated as early as this month. (CNN)

Consolidation and control

The acquisition value would be in the billions of dollars – Grubhub is currently valued at a market cap of $5.33 billion. The two players are the two largest in the sector and a combined Uber-Grubhub would control 55 percent of the U.S. meal delivery market, according to Wedbush Securities. The market lapped up the news of the deal and pushed up Grubhub shares by 39% until they were halted. They closed higher by 29%, while Uber rose 2.3%.

The COVID-19 pandemic has proved a shot-in-the-arm for food delivery services because people were locked into their homes and many chose to order out. Uber has obviously factored in the new dynamics of the market and accordingly made its play for Grubhub.

“There is a silver lining to this unbelievably tragic COVID virus, which is the business that we have of Eats and the category in general, just looks like it is going to be substantially increased and some would say by multiples,” said Uber CEO Dara Khosrowshahi on an earnings call

According to TechCrunch, Uber has decided to remain in only those markets where its Eats service is either the first or second-largest player. It recently exited from countries such as the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay, and Ukraine.

But it’s not a done deal, yet

Grubhub, however, is reportedly demanding 2.15 Uber shares for each Grubhub share. And talks are currently stalled, it appears.

These things go through many negotiations and it could be days before a deal is done and dusted.

Meanwhile, an investor may want to take a punt on the food delivery service sector, its new-found popularity with consumers amidst the pandemic, and Uber turning a major player in the industry.

One option is to buy ETFs holding shares of Grubhub.

Grubhub ETFs

Fund Name Ticker % Allocation Expense Ratio
ProShares Online Retail ETF NYSEARCA: ONLN 4.59% 0.58%
ProShares Long Online/Short Stores ETF NYSEARCA: CLIX 4.38% 0.65%
Amplify Online Retail ETF NASDAQ: IBUY 3.15% 0.65%
SPDR S&P Internet ETF NYSEARCA: XWEB 3.00% 0.35%
SPDR S&P Retail ETF NYSEARCA: XRT 1.69% 0.35%
Source: https://www.etf.com/stock/GRUB

Related Story:   Liquid Alternatives: Buffett Dumps Airlines; What That Means For the JETS ETF

Image credit: Flickr    

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