Anti-Trump Email Lands GrubHub Inc (GRUB) CEO in Hot Water

No matter the motives behind GrubHub Inc (GRUB) CEO Matt Maloney's political email, the stock is paying the price

Nov 11, 2016 at 10:59 AM
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GrubHub Inc (NYSE:GRUB) CEO Matt Maloney has been put on the defensive, after a controversial email he sent to employees on Wednesday. In the message, Maloney wrote that he "absolutely reject[s]" Donald Trump's "nationalist, anti-immigrant and hateful politics," before adding, "If you do not agree with this statement then please reply to this email with your resignation because you have no place here."

Several media outlets construed this as an invitation for Trump supporters to quit their positions at GRUB. Maloney denied that interpretation on a blog post yesterday, saying that he simply meant to warn against "discriminatory activity" and "hateful commentary in the workplace." Regardless, the scandal is taking a toll on shares of the food-ordering platform, last seen 3% lower at $35.98.

This isn't the first time GRUB stock has struggled in recent weeks. In fact, since approaching the $45 level in late September, the shares have pulled back 20%. That's not to say it's been all doom and gloom for GrubHub. In fact, on a year-to-date basis, the stock has soared almost 49%.

With the shares down big in morning trading, though, put options are on fire. At last check, the contracts were running at 11 times the expected intraday rate. In fact, GRUB puts account for each of the top 10 most traded strikes, with relatively heavy action at the November, December, and January 2017 32.50 strikes, as well as the November and December 35 strikes.

If these traders are betting against GRUB by purchasing fresh positions, it would represent a break from the recent trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 18.10 calls for every put -- the most top-heavy ratio recorded in the last 12 months.

What's more, GRUB sports a Schaeffer's put/call open interest ratio (SOIR) of 0.59. In other words, calls easily outstrip puts among options expiring in the next three months. In fact, this ratio has been lower only 12% of the time in the prior year.

That said, not every call player is necessarily bullish toward GrubHub Inc (NASDAQ:GRUB). After all, short interest has risen in recent reporting periods, and now accounts for 22.6% of the shares' float. At the stock's average daily volume, it would take a week to cover these bearish positions. Long story short, it's possible short sellers have been purchasing GRUB calls to hedge against an upside surprise.

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