Investor Jim Chanos is betting against GrubHub, and said the food delivery company makes almost nothing per order.
Chanos, a famous short seller and founder of Kynikos Associates, made the comments on CNBC's "Halftime Report" Thursday from the Delivering Alpha conference, presented by CNBC and Institutional Investor. He predicted fees will come down, while employee costs will rise.
"Right now, GrubHub is making almost no money per order -- it's something like 15 cents," Chanos said. "There's just no margin in this business."
Shares of GrubHub fell sharply after the comments, and was down as much as 3% Thursday. Chanos also highlighted fierce competition in the industry for drivers, and the depth of other food delivery options.
"We believe that this pressure is occurring at both ends of the spectrum for the delivery companies," Chanos said. "Not only are we seeing pressure on the labor side with the California law, we believe that the labor arbitrage -- calling these guys contractors -- works in insidious ways.
Chanos said that the company can't afford to be as aggressive as Uber, which has its own food delivery service Uber Eats, because it doesn't have the "financial wherewithal." Competing with Uber, Chanos said, is like being "locked in a cage with a psychopath with an ax."
And while there's competition, Chanos said growth in the restaurant business itself has been stagnant.
"The restaurant business is a tough business," he said. "Even if this all works, and all four of these delivery companies grow to 20 or 25% of all meals, you are growing into a no growth business."