Grubhub Stock Falls on Fears of New York Regulation

News of partnerships with well-known food brands and the potential for easing competitive pressure has helped Grubhub stock (ticker: GRUB) recover substantial ground since early June. On Thursday, however, investors fretted about something else: regulatory worries in New York.

The shares were recently down 3.4% to $74.43 following a Wednesday night New York Post report that said the state is considering rules that could substantially cut into its per-order fee income and require it to be listed on liquor licenses. The report cited “sources close to the situation” and a spokesman for the New York State Liquor Authority.

Instead, there is a growing number of fronts that Grubhub and other digital companies have to watch for regulatory challenges. The New York rules, if enacted, would presumably affect Uber (UBER) Eats, DoorDash, and other third-party food-delivery services. Another example came Thursday in ourstory about how California could change how gig-economy workers are classified.

“We ascribe a low probability of success here unless the entire third-party delivery industry is going to go through a similar regulatory curbing,” Needham analyst Brad Erickson, who has a Hold rating on Grubhub, wrote Thursday.


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