Shares in Ocado soared by as much as 40% on Thursday, amid market speculation that the online supermarket and retail technology group could be the target of a takeover.
In their second day of gains, Ocado shares briefly reached 631p from 430p at Wednesday’s close of trading, before falling back.
The rally sent the shares to their highest level since late February, taking Ocado’s market value to more than £4.5bn.
The share price move followed market rumours that big US tech firms such as Amazon could be considering making a bid for the company.
Amazon has been suggested as a potential suitor for Ocado for years, and it also reportedly expressed an interest in the John Lewis Partnership’s supermarket chain, Waitrose, in 2018. Ocado and Waitrose ended a 20-year partnership in 2020.
It comes less than a month after the company narrowly clung on to its prized spot in London’s FTSE 100 in the most recent quarterly shake-up of the blue-chip index, after a sharp fall in its share price since the depths of the pandemic.
Even after the most recent jump, Ocado’s share price remains about 40% lower than the levels reached during Covid, when it became one of the stock market winners as successive lockdowns saw consumers splash out on eat-at-home groceries, temporarily boosting its sales.
However, Ocado sales suffered as the pandemic effect subsided and many households returned to shopping in supermarkets.
In February, it reported a record annual loss of more than £500m for 2022, while revenues at Ocado Retail, its joint venture with M&S, fell by nearly 4%.
In response, the company said it was pausing the introduction of new distribution centres in the UK, and in April Ocado Retail announced the closure of its oldest warehouse, in Hatfield in Hertfordshire, putting 2,300 jobs at risk, as it switched to a new automated site in Luton.
Ocado’s shares have been “about as flat as an open bottle of lemonade since the pandemic”, said Danni Hewson, head of financial analysis at the City broker AJ Bell. “But third parties, including reportedly Amazon, may still see value in the brand, technology and infrastructure. Ocado’s hopes of becoming an online groceries partner to businesses across the globe has only had limited success, and shareholders may be open to a bidder putting them out of their misery.”
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Ocado’s warehouses were praised by analysts at Bernstein in April, who described the company’s technology as “market-leading and differentiated” and said it had “years of experience running an online business”.
They added that Ocado had a “strong set of partners from the US to South Korea” and a “large pipeline of growth contracted”, while predicting that the next few years would test the group’s ability to break even.
Ocado and Amazon declined to comment on the reports of a possible takeover.
