The communication strategy of Just Eat Takeaway.com (JET) was criticised by Cat Rock Capital in a public presentation released this week. Cat Rock, which owns 4.7 per cent of Just Eat’s shares, believes that the company’s share price underperformance is due to the erratic and unclear nature of the chief executive's communication to shareholders. It has suggested that Just East should “fix communication”, “clean house” and “explore strategic options” in order to improve its valuation.
Just Eat is the largest food delivery company in Europe and has more than double Deliveroo’s market share in the UK. In the two years before Cat Rock’s statement it had grown its gross merchandise value by 100 per cent. But in the same period its share price fell 11 per cent, meaning its valuation dropped by 75 per cent to just 2.6 times its revenue.
Cat Rock’s statement already seems to be having a positive effect, with Just Eat’s share price up 5.5 per cent on the day of the announcement.
The specific communication complaints centred on how Just Eat had “completely failed to proactively communicate the costs of its logistics investments,” which Cat Rock claims led to analysts lowering their cash profit (EBITDA) estimates from €400m in August 2020 to losses of €350m on the day of the announcement. It also criticised Just Eat for complaining about the difficulty of making profits from logistics and grocery in Europe as it “invests aggressively” in both the sectors.
As part of “exploring strategic options”, Cat Rock has suggested that Just Eat considers "strategic combinations with other global players that could strengthen the company and generate significant shareholder value". According to the Financial Times, the investor suggested divesting assets outside the group's core European offering, including its Brazilian joint venture iFood and Grubhub - the US delivery company that Just Eat acquired for $7.3bn last month.
The FT reported that Cat Rock’s decision to go public with its complaints followed a private letter to Just Eat management last month from activist shareholder Oceanwood Capital management which had similar concerns.
A spokesperson for Just Eat Takeaway.com said that the group "has a regular dialogue with all its shareholders and we take all their views very seriously". They added: "As announced previously, we will be hosting a capital markets day in October to provide the market with increased visibility on how we will capitalise on the exciting, long-term growth opportunities that we have across our business."
