Ocado's Seven-Minute Arbitrage: Rapid Press Release Analysis
Ocado is a UK-listed grocery technology company that sells Customer Fulfillment Centres (“FCs”, and it’s a British company, so we’ll spell centre like this) to grocery chains worldwide. These centres are essentially large warehouses with some automation and fulfillment technology that allow grocers to offer grocery delivery to their customers without developing the necessary warehouse and fulfillment technology and infrastructure. Ocado also has an online grocery business in the UK. This article explores a notable Ocado arbitrage opportunity that emerged from a seven-minute information lag during a significant company announcement.
The Sobeys-Ocado Partnership: A Canceled Agreement
One of Ocado’s clients is Sobeys, a Canadian grocery chain, and its e-commerce brand Voilà. Sobeys is owned by Empire, a Canada-listed company. Ocado and Empire jointly announced a deal in May 2019 worth CAD 95mn (~USD 70mn, GBP 56mn at the time of closing). Five years later, in May 2024, the companies fell out, and Sobeys decided to terminate its relationship with Ocado. It announced this to the public in its FY 2024 results1 published on June 20th. This event set the stage for an unusual trading opportunity.
Information Dissemination: Empire's Release vs. Ocado's Market Reaction
In line with normal procedures, Sobeys’ parent Empire announced its results before the market opened at 6.30 a.m. Eastern time. However, 6.30 a.m. Eastern time is 11.30 a.m. BST, in the middle of the trading day for UK-listed Ocado. Losing the Sobeys contract represented material news for Ocado, as evidenced by the company’s share price dropping by 11.7% on the day of the announcement. Consequently, Ocado issued its own press release shortly after Empire’s results.
The Seven-Minute Ocado Arbitrage Opportunity
Despite Empire's release at 11.30 a.m. BST, Ocado’s share price began its decline only seven minutes later, around 11.37 a.m. BST. This delay occurred because Ocado’s official update was published at 11.37 a.m. BST. During these seven minutes, UK investors had not yet incorporated the new information from Canada. A shrewd investor capable of rapid press release analysis could have identified a highly attractive trade, exploiting this information asymmetry.
Implications for Financial News Analysis and Trading Strategies
The emergence of this significant Ocado arbitrage opportunity in a closely watched stock demonstrates two key points. First, diligent financial news monitoring and precise press release analysis can still uncover attractive short-term trading opportunities. Second, any systematic approach to capitalize on such situations requires advanced and specialized technology to swiftly process and correlate information. Understanding the nuances of stock market reaction to delayed announcements is crucial for investors.
Footnotes
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Being a grocery business, the company has a rather odd financial year, terminating on the first Saturday in May of each year. Costco ($COST) follows a similar convention requiring analysts to consult a calendar to determine when the companies’ respective financial year ends. ↩
Alex is the co-founder and CEO of Marvin Labs. Prior to that, he spent five years in credit structuring and investments at Credit Suisse. He also spent six years as co-founder and CTO at TNX Logistics, which exited via a trade sale. In addition, Alex spent three years in special-situation investments at SIG-i Capital.