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Amazon takes a bite out of Deliveroo in $575m funding round

daniellelevy
Written By:
daniellelevy
Posted:
Updated:
17/05/2019

Tech giant Amazon has taken a significant stake in food delivery business Deliveroo, causing rival Just Eat’s share price to tumble.

Amazon represented the biggest investor in Deliveroo’s latest capital raise, which totalled $575m (£450.8m).

Existing investors T Rowe Price, Fidelity and Greenoaks also participated, according to the Financial Times.

The money raised will be used to invest in Deliveroo’s technology and to fund the next stage of growth for the business.

The investment and tie-up with Amazon leaves Deliveroo well-positioned against rivals Just Eat and Uber Eats. It follows Amazon’s decision to shut down its own food delivery service called Amazon Restaurants in the UK last year.

The news caused Just Eat’s share price to plummet 7.4% to £6.28 by 11:45 on Friday.

Laith Khalaf, senior analyst at Hargreaves Lansdown, commented: Amazon’s investment in Deliveroo has taken a bite out of Just Eat’s share price. It’s not just the fresh funding that has stoked concerns, Amazon is known for its tolerance for losses, and its willingness to price-gouge in search of market share.”

Khalaf said the new investment represents “one of Amazon’s many tentacles”.

“They say profits are sanity and sales are vanity, in which case there’s plenty of mirror-gazing going on in the market these days, particularly in the tech sector. Unlike Just Eat, Deliveroo is not yet profitable, and Amazon’s backing shows that’s not a barrier to investment,” he added.