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A screech of brakes, a flash of red, and then whack! Short sellers betting against Ocado shares were hit by a bus on Tuesday, one they always knew might bowl round the corner.

The online grocer has for years promised to reveal customers for its technology, which claims to make supermarket delivery services efficient and profitable. After Groupe Casino said it would use the system in northern France, Ocado’s share price jumped a fifth higher.

A few numbers point to where the bus is going. Casino will build a warehouse near Paris, supply the stock, the vans and the drivers. Ocado will spend £15m next year to put its machinery inside, with more to follow in a two-year project to build and launch. The deal is open ended, depending on what Casino chooses to do further down the road. Commercial terms were not disclosed.

To sketch a rough map, Ocado will be paid a fee based on the annual capacity of the warehouse, and in the past has told investors of hopes for royalties of between 2 and 5 per cent on that figure. Assume £400m of capacity and a 3 per cent fee, to get to £12m of annual revenue. Spread £30m of capital investment over a decade, and maybe such deals could throw off £5m of profit a year, before tax.

The key question now is how many more buses come along. Casino could build further warehouses. Ocado also announced a partnership in June with an unnamed international retailer. Amazon’s purchase of Whole Foods, the upmarket US chain, is forcing others to think seriously about their online delivery services.

Yet even if Ocado’s £2bn valuation requires the bus tally to be large, just asking the question is to take it seriously as a technology company. At times the most shorted stock in the London market, the sell case has been crushed.

Some investors got off the road already, with the proportion of stock on loan falling in recent weeks. Tuesday’s move in the share price has merely recovered recent losses. Still, it would take weeks of normal trading to unwind sceptical bets disclosed as of Monday, by buying stock. Beep beep, get out of the way!

The Lex team is interested in hearing more from readers. Are there still reasons to bet against Ocado? Please tell us what you think in the comments section below.

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