Crash of the share price, expulsion from the leading index Dax: The boss of the delivery group Delivery Hero did not have a good year on the stock market. At the end of the year, the founder of the former Berlin shooting star describes how the collapse of the share price felt: He had “shame and terrible feelings of guilt”, writes Niklas Östberg on Twitter.
“Friends, family, colleagues, trusted investors and pension funds have lost significant sums of money,” he notes, remembering February 11, 2022. In the three days before, the stock had fallen first by 32 percent, then by a further 39 percent. “At that point we were the first to crash. That weekend I spoke to frustrated investors at 2 a.m. to 3 a.m.,” Östberg recalls.
The Swede founded Delivery Hero in 2011. The group now delivers to 70 countries in Asia, Europe, Latin America, the Middle East and Africa from restaurants and its own food warehouses. However, the company has largely withdrawn from the German market. Delivery Hero is currently worth a good twelve billion euros on the stock exchange. At the beginning of the year it was more than double.
With the crash in mid-February, the share of the Berlin delivery group collapsed earlier than other growth stocks, almost all of which were severely punished on the world stock exchanges in 2022. For most values, however, this only really happened after the start of the Russian attack on Ukraine on February 24th.
Since then, investors around the world have reassessed high-growth companies: before that, their focus was primarily on the pace of growth, now it is on the size of the losses or profits.
One reason is that higher interest rates make financing growth more difficult. Investors are therefore turning to companies that are showing stable profits. But even large tech stocks like Apple and the Google group Alphabet have lost feathers because they had previously made very strong gains on the stock exchange.
This revaluation has cost many investors a lot of money – at least on paper. However, only a few managers were as emotional as Östberg is now. The 42-year-old remembers: At Delivery Hero, a warning from the company about higher spending due to the increasing competition at the time and higher losses was the reason for the sudden drop in shares last February.
“When it came to expenses, we were realistic about what it would cost to survive in the assumed further competition (which then no longer took place). In terms of growth, we saw the slump coming and lowered expectations in one step, while others had to correct themselves twice,” explains Östberg.
He does not admit mistakes in his posting. Growth collapsed even less than feared. Delivery Hero may have lost six months of development time – but that’s almost nothing in the long run. It helped that the company got money through a bond.
However, the step also shows that a capital increase like in previous years, which would give the company interest-free equity, was apparently no longer possible due to the tense market value.
“We had a rough year, the crash days were uncomfortable, we still lost a lot of market valuation… – but overall our company is now financially stronger and more competitive,” concludes Östberg. Over the year, Delivery Hero lost even less in market value than other delivery services. The MDax share is currently trading a good 54 percent lower than at the beginning of the year. The competitor Just Eat Takeaway, to which Lieferando belongs, is almost 68 percent, as is the US group Doordash, which recently took over the European player Wolt.
The analysts share Östberg’s positive view – despite the huge losses in market value: the vast majority recommend the share for purchase. You see the course valued fairly on average at 64 euros – significantly more than the current 45 euros. The analysts point out that Delivery Hero is on target towards profitability.
Östberg himself repeated his announcement on Thursday that the company would be noticeably profitable in the second half of 2023 – albeit before interest, taxes and depreciation. The company should be able to get by without fresh money in the future: free cash flow should be positive for the first time in the second half of 2023. That means: From then on, more money flows into the till than out. If the plans work out this time.
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