Business

Grubhub stock falls after Jim Chanos says he’s shorting

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Social Links for Lisa Fickenscher
Published Sep. 19, 2019
Updated Sep. 19, 2019, 10:01 p.m. ET

Shares of Grubhub dropped nearly 6 percent on Thursday after a prominent short-seller revealed he was betting against the food delivery giant.

Investor Jim Chanos said Grubhub is facing a perfect storm of bad news as its drivers push for higher pay; lawmakers push for workers’ benefits, and restaurants become more savvy about pitting delivery companies against each other.

“Right now, GrubHub is making almost no money per order — it’s something like 15 cents an order,” Chanos said in a CNBC interview. “There’s just no margin in this business.”

The founder of hedge fund Kynikos Associates said he sees Grubhub’s costs rising as fees from restaurants decline. “Pressure is building on both sides,” he told CNBC.

Chicago-based Grubhub — which is also under scrutiny by New York legislators for overcharging restaurants — has also been losing market share to Uber, Postmates and Doordash, Chanos said.

Despite being the Big Apple’s market leader, Grubhub — which owns food delivery company Seamless — is outmatched by Uber’s deep pockets, Chanos said, likening a Grubhub/Uber fight to getting “locked in a cage with a psychopath with an axe.”

Chanos began shorting the stock after he noticed social media posts by food delivery drivers who were getting notices from the Internal Revenue Service informing them that they haven’t been paying Social Security and Medicare taxes, Chanos said.

Legislators like Sen. Chuck Schumer (D-NY) have been cracking down on Grubhub ever since The Post revealed in May that the company has been charging eateries for phone calls that never resulted in orders. The practice has allegedly been going on for years in some cases. The food delivery service is also under threat from a New York State Liquor Authority proposal, which could cap the fees delivery companies charge restaurants.

Chanos, who did not return a request for comment, has tweeted some of The Post’s exclusive coverage of Grubhub’s challenges.

Grubhub’s stock closed down 5.2 percent to $60.51 on Thursday.