GRUB's fee income could take a hit on new SLA rules
GrubHub Inc (NYSE:GRUB) stock is among the biggest losers on the Big Board today, following a report that a new set of rules from the New York State Liquor Authority (SLA) could put a major dent in GrubHub's fee income. Specifically, sources told the New York Post that the new rules could cut fees from 15%-30% of a takeout order down to 10%, and could require the company "to be listed on thousands of liquor licenses, creating a potential trove of legal liabilities and bureaucratic hassles." Against this backdrop, GRUB stock is reeling, and options are flying off the shelves.
GRUB shares are down 4.4% to trade at $73.70, set to close beneath their 20-day moving average for the first time in more than a month. Prior to today, the equity had been in rebound mode, gaining roughly 30% from its May 20 annual low of $60.30 to its recent peak in the $78-$79 area -- a region that emerged as a speed bump over the past couple of weeks.
So far today, about 2,500 GrubHub puts have crossed the tape -- two times the average intraday volume. Meanwhile, roughly 3,400 GRUB calls have traded -- 1.6 times the norm. Most active is the weekly 7/12 75-strike call, which has seen notable buy-to-open action. By purchasing the calls to open, the buyers expect the shares to bounce back atop the $75 marker by week's end, when the options expire.
Elsewhere, several short sellers are likely cheering the aforementioned Post report. Short interest accounts for nearly 20% of the security's total available float, or about seven days of trading, at GRUB's average daily volume.