Weekly Reads - July 11, 2022
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Amazon is back in the food delivery game but this time with a partnership with Grubhub rather than launching their own service. Amazon closed down its food delivery business Amazon Restaurants in 2019 after the product found very little traction. Since then, Amazon has forayed into food delivery via their investment in Deliveroo and now with their partnership with Grubhub (owned by Just Eat Takeaway). This new partnership has Amazon taking a 2% stake in Grubhub and Prime Members having access to free unlimited food delivery for an entire year before being charged the subsequent year. This partnership comes at an interesting time with Just Eat Takeaway looking at potential divesting options for Grubhub who they bought recently in 2021. For Just Eat Takeaway this partnership may be out of desperation in order to start delivering attractive growth at Grubhub to attract potential buyers and show existing investors that the acquisition was not a mistake. For Amazon it’s obvious this partnership is another way to add value to its prime membership service which gives them more opportunity to attract new subscribers and increase prices on existing memberships as the service continues to provide more value outside of delivery. Amazon also has the ability to take up to a 15%stake in Grubhub giving them flexibility in potentially expanding the partnership or even acquiring the business if the partnership is successful.
The fintech revolution in Latin America continues to roll on with Peru expected to see more favorable banking regulatory developments this year giving consumers more access to digital financial service options. It is expected that Peru’s fintech sector grows from over 170 fintech companies to more than 200 in 2022. A third of these companies are expected to come from overseas as new regulatory developments such as law amendments in the banking and finance sector and talks about open banking attract new competitors. Long-time incumbents are also joining in the fintech revolution with government owned lender Banco de La Nacion offering its own fully digital bank app and Grupo Credicorp the largest financial services holding company in the country working to turn its e-wallet app Yape into a super app. These changes have been spurred by the massive adoption of mobile banking in the country with over 40%of financial transaction being down via mobile as of 2019 versus just 6.5% in 2017.
The SPAC boom is officially over with one of the most prominent SPACs by Bill Ackman being shut down and the money being returned back to investors. A fringe investment vehicle prior to 2020, SPACs became all the rage in 2020 as a way for private companies to quickly go public and investment companies being able to raise large amounts of capital quickly. The rapid growth of SPAC deals led to an imbalance in the supply of investable capital and the supply of quality private companies willing to go public. This led to many private companies that were not ready to go public going public leading to massive underperformance in their share price. According to the article only 11% of SPACS that went public in 2021 are now trading above their offering price with on average SPAC shares having lose -43%. The only winner from the SPAC era were the investment banks who made millions at every point in the SPAC process taking in fees for providing advice on mergers, sell shares to the public, and for securing additional investors for these SPAC companies. With many shareholders burnt by SPACs it is unlikely we see a rebound in SPAC deals in the medium term as new regulation and lack of investor interest limit future SPAC deals.