Home Finance The Herd Instinct – Lessons to be Learned

The Herd Instinct – Lessons to be Learned


It gets dangerous when journalists and analysts start running in the same direction, as in the Wirecard case or the Neuer Markt, the technology segment of Deutsche Börse which, like Wirecard, eventually vanished into thin air.

Delivery Hero SE is a European multinational online food-delivery service based in Berlin, Germany. The company operates in 40+ countries internationally in Europe, Asia, Latin America and the Middle East and partners with 500,000+ restaurants.

Comparing does not mean equating: The meteoric rise of the Delivery Hero company was pushed onto the DAX (Deutscher Aktien IndeX, the German Stock Exchange) by business editors and investment bankers.

A total of 13 analysts recommend buying their stock, three holding – but no one selling. This uniformity is not reassuring, but rather suspicious.

A food delivery company simply does not belong alongside Daimler (Mercedes), SAP (in 2001 was the 3rd largest software company in the world) and BASF (the largest chemical producer in the world).

Delivery Hero is great as a start-up, but an impossibility as a stock exchange company like DAX:

  1. Stock exchanges bring together the country’s premium companies whose business model can be considered tested. Delivery Hero is a company that has been in the red since it was founded. The past financial year ended with a loss of €648 million.
  2. while sales at Delivery Hero almost doubled to €515 million in the first quarter of 2020, delivery costs tripled at the same time.
  3. Of the 30 companies listed with the German Stock Exchange (DAX), all supply to their home market. Delivery Hero avowedly did not trust itself to ever be able to operate the German business profitably – and sold it.EPI-SUMMIT-2020_200x200
  4. Delivery Hero’s business model is also highly risky because there are powerful competitors. They have already withdrawn from France, the Netherlands and the large South American market of Brazil. They are not represented in America and there is no intention of attacking there. With Uber Eats – a subsidiary of the transportation service provider Uber – there are competitors who, like Just Eat Takeaway and Amazon “Fresh”, have global ambitions. The order platform market is facing consolidation.
  5. The company operates in one of the most intensely regulated markets in the world, the labor market. In almost all of the important countries, the minimum wages are set by the state. A business model based on wage depression in the face of low margins can never be sustainable.
  6. The current success reports are a result of the corona pandemic. Orders doubled in the second quarter, also because restaurants and company canteens were closed.

Delivery Hero belongs as a “speculative admixture” in the depots. It is a high-risk investment in the hopes of reaping extraordinary returns.

The reason we bring these observations to this platform is to learn from this model. A basic blueprint of the questions to ask, what issues to be aware of – don’t just listen to the sales pitch.

Don’t follow the herd.


Translated from the German original of Gabor Steingart.