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Why Grubhub Stock Rocketed 36% Higher Today

By Reuben Gregg Brewer - May 12, 2020 at 11:23AM

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The food delivery company could be in play and investors are clearly excited by the idea.

What happened

Shares of food delivery company Grubhub (GRUB) rose as much as 36% on May 12. The jump happened about an hour or so into the trading day before pulling back. By 11:30 a.m. EDT, the stock was still up roughly 25%.

So what

The big jump was precipitated by a news item from Bloomberg that claimed Uber Technologies (UBER 4.30%) had approached Grubhub with an acquisition offer. Citing "people familiar with the matter," Bloomberg said the two sides could reach a deal this month, but gave no specifics of the proposed transaction. Uber's stock was up by around 5% by 11:30 a.m.   

A woman on a couch eating takeout Chinese food

Image source: Getty Images.

Uber, with a $58 billion market cap, is a much larger company than roughly $5 billion market cap Grubhub. And Uber has a much more diverse business, though it's largely known for connecting drivers with customers. That said, Uber and Grubhub compete directly in the food delivery space, which has gained increasing prominence during the economic shutdowns related to COVID-19. Yet with no takeover price reported, investor excitement here is built mostly on hype right now.

Now what

At this point, the news is out and investors have probably missed the big gain in Grubhub's stock. That said, it's usually a bad idea for long-term investors to buy a stock just because of acquisition rumors, anyway. Rumors don't always turn into action. If you own either company, you'll obviously want to keep an eye on the story here. If you don't own either company, this rumor alone shouldn't be enough to get you involved.

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Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$21.34 (4.30%) $0.88

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