Investors punish Delivery Hero
The news that a EU fine for Delivery Hero could be significantly higher than previously thought alarms investors. In a panic, they sell off papers and push the stock down with up to 17% in the negative. The food delivery service must set aside significantly more money.
Delivery Hero faces a potentially much higher EU fine than previously anticipated due to allegedly anti-competitive behavior. The food delivery service announced that the EU fine could exceed 400 million Euros. Consequently, the previously created provision of 186 million Euros will be significantly increased. The stock of the company experienced one of its largest price drops in history. However, the paper partially recovered in further trading.
The new estimation of the possible fine is based on the latest informal exchange with the EU Commission and subsequent analysis, Delivery Hero confirmed the step and emphasized that it continues to cooperate fully with the authorities. The company has been under the scrutiny of EU cartel watchdogs for some time due to suspected market division. They are also investigating alleged anti-poaching agreements and the exchange of economically sensitive data. Since 2022, the authorities have searched the business premises of Delivery Hero and its Spanish subsidiary Glovo several times.
The current cartel proceeding is another negative regulatory development that Delivery Hero brought into the house with the acquisition of Glovo, analyst Giles Thorne of investment bank Jefferies wrote. Glovo had been fined for millions due to labor law violations in Spain.
As a reaction to a potentially much higher fine, Delivery Hero's stock dropped by more than 17% at times and was as cheap as 17.35 Euros, the lowest since half a year ago. "The biggest problem for the market is not the height of the fine nor the ability of the company to pay it," Thorne explained. Concerns among investors, however, are the behavior patterns that emerge from the investigations. The immediate actions of Delivery Hero are welcomed by the expert. It's positive that the management openly acknowledged the potential fine.
The EU's potential increased fine for Delivery Hero's alleged anti-competitive practices has sparked concern within MDax companies, causing a ripple effect in the EU economy. The share prices of similar food delivery companies might also be impacted due to the scrutiny.
Following the revelation of a potentially doubled EU fine for Delivery Hero, analysts are analyzing the potential implications for other MDax companies operating in the same competitive market. The EU's strict enforcement of fair practices could set a precedent for the industry.
