This post was originally published on this site
https://images.mktw.net/im-316291
Shares of European food-delivery groups fell sharply Tuesday after the discounted sale of a big share stake raised questions about the market’s valuation of the sector.
Berlin-based Delivery Hero
DHER,
said late Monday that it sold about 68 million shares in U.K. peer Deliveroo
ROO,
— representing around 4.5% of the London-headquartered group — at a price of 113 pence to raise £76.84 million ($97.43 million).
That was a 7.3% discount to Deliveroo’s closing price on Monday and consequently when the market next opened the stock was marked down, though by lunchtime in London it was off just 3.8% to 117.3 pence.
The seller fared worse, with investor disappointment at the amount raised pushing Delivery Hero shares in Frankfurt down by 6.4% to €21.14. German food-delivery group HelloFresh
HFG,
was caught in the downdraft, its shares losing 3%.
Delivery Hero said the sale was undertaken to fully dispose of a minority investment as part of its “commitment to disciplined capital allocation,” and that the proceeds would be used for “general corporate purposes”.
Analysts said the disposal showed how food-delivery groups were facing financial pressures as business has shrunk relative to the boom during the COVID pandemic.
“We see this as sensible regarding [Delivery Hero’s] liquidity profile but acknowledge it could be seen as evidence of balance sheet pressure,” said Joseph Barnet-Lamb at UBS.
Broader markets were generally higher, after European bourses inherited yet another record close for Wall Street. The DAX
DX:DAX
in Frankfurt rose 0.2%, while the CAC 40
FR:PX1
in Paris added 0.5% to a new record after the resurgence of luxury-goods groups.
London’s FTSE 100
UK:UKX
added 0.5%, though a notable underperformer was drinks giant Diageo
DGE,
The maker of Guinness stout and Johnnie Walker whisky fell 3% after revealing results that showed a slump in sales of expensive spirits in its Latin America and Caribbean segment.
“Perhaps drinks cabinets at home were well-stocked during the pandemic and people still have plenty of spirits left over, so there is no need to keep buying more for a while?,” pondered Russ Mould, investment director at AJ Bell.
International Consolidated Airlines shares
IAG,
dipped about 1% after Morgan Stanley downgraded the owner of British Airways, Iberia and Aer Lingus to a “relative underweight”.
“With demand data holding up reasonably well and valuation undemanding…our base case does not see absolute downside,” said the Morgan Stanley transport team.
However, they added: “High North Atlantic exposure, less cushion from cargo, and potentially less of a tailwind from corporate if it starts to gain momentum mean we see less scope for upside surprise than at peers. High capex in coming years also offers less attractive free cash flow generation.”
