Reports today suggest that Uber, the American ride-hailing giant with a worldwide footprint, will lose out on its effort to purchase Grubhub, an American food buying and shipment service . Uber takes on Grubhub locally with its Uber Consumes service; a tie-up in between the 2 could have given Uber suffocating market share in the United States, and thus improved economics.
Losing Grubhub to European-rival Simply Consume Takeaway– the Wall Street Journal broke the news— is difficult news for Uber. Its shares are off almost 5% today after the news while Lyft, its local rival in ride-hailing, is off a more modest 2.5%.
Reports recently named 2 European business as potential acquirers of the American company; the story of Uber losing to a various business in its pursuit of Grubhub heightened this morning when CNBC reported that the ride-hailing company could drop its bid over anti-trust concerns.
Financiers are less than enthused that Uber stopped working to close the Grubhub deal, if reports hold up.
The why is basic enough: Without Grubhub, Uber Consumes is simply another money-losing food shipment service that has a long maturity cycle ahead of it prior to it helps lower its parent business’s unprofitability. Ride-hailing, Uber’s standard bread-and-butter, and source of positive contribution margin, is currently recuperating from pandemic-driven lows.
Without Grubhub and a higher capability to squeeze money from dining establishments that more market might have managed Uber, its near-term economics may show slow to improve. Ride-hailing is returning, but is still creating revenues lower than from year-ago totals.
And with Uber Consumes installing around $100 million in unfavorable adjusted EBITDA each month, food shipment is little assistance to the unprofitable megacorp.
More when the deal closes, if it does today as expected.
Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.