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11 July 2022

Market Round-Up

Last week, Boris Johnson resigned as Prime Minister. This followed a wave of resignations from not only senior leaders amongst the party but also many junior staffers as resentment grew following multiple scandals and mishaps from the ex-Mayor of London. This now means that all three most recent Prime Ministers resigned during their tenure and marks a rather embarrassing period for the Conservative party which has struggled to deal with many aspects of key issues such as the post-Brexit fallout, the cost-of-living crisis and multiple scandals. The Cboe UK 100, however, reacted rather well to the news, up over 1% on the day before and the day of his resignation, largely thanks to the drop in the Pound that preceded it. Given that the majority of Cboe UK 100 revenues are earned overseas, such companies benefit from a fall in the Pound.

The world’s biggest online retailer, Amazon, has taken an initial 2% stake in Grubhub and will offer its US Prime membership customers a one-year membership to the food delivery service. Grubhub is the US arm of Just Eat Takeaway (JET), whose shares have fallen 67% so far this year, hitting a record low on 5th July 2022. In light of the announcement on 6th July, JET’s shares rose 18% to €16.24 in early trading, its biggest daily gain since December 2018. Just Eat has said that the US tech company will have the opportunity to increase its stake to 15%, depending on its performance and ability to attract new customers.

The deal is hoped to be a vital revival for Just Eat. Despite owning one of the world’s largest food delivery apps, the food delivery service has lost more than half of its market value this year. This came after facing internal conflict when an investigation was launched into its chief operating officer’s personal conduct followed by the chairman stepping down in May. JET also faced criticism from investors last year when it purchased Grubhub for US$7.3bn. The company hopes that the deal will expand membership of Grubhub+ and help it to deliver on its mission to connect an increasing number of diners with local restaurants. The Amazon partnership further creates an excellent acquisition channel for the company and the backing of a tech titan as JET looks to navigate an extremely competitive landscape in both the UK and US. While questions still remain over the profitability and long-term sustainability of the current model employed by JET, this is certainly a step in the right direction for a company that is looking to win back investors’ hearts.

After train strikes in the UK in the last week of June, there is set to be more industrial action across the country but this time it will be Royal Mail managers striking. Around 2,400 managers will take industrial action between 20th and 22nd July, and they will also work to rule between 15th and 19th July in response to the postal services plans to slash 700 jobs and cut the pay of its members by up to £7,000. Trade union Unite has accused Royal Mail of being solely profit-focused while ignoring the needs of customers and employees. It has argued that the parcel delivery company expects managers to provide thousands of unpaid hours to maintain its service and that it engenders a culture of greed. Such plans by companies across the UK have led to increased unionisation pressures as workers fight to keep their jobs and pay at levels in-line with inflation as the cost-of-living crisis bites. Forecasts for a recession, however, may mean that this is not possible for many firms, as demand dries up and strikes become commonplace.
 
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