Cyclist Deliveroo in London, UK
Dinendra Haria | SOPA photos | Light Rocket | Getty Images
LONDON – British food delivery company Deliveroo sank on its stock market debut on Wednesday, as the company faces pressure from major investors and trade unions over workers’ rights.
Deliveroo, which supports it Amazon, Its shares were down about 30% in early trades compared to the issue price, before paring some of the losses.
The company priced its shares at 3.90 pounds ($ 5.36) on Tuesday, giving it an expected market value of 7.59 billion pounds, which was at the end of its IPO target range.
But the company’s share price fell to around £ 2.73, according to Reuters data, as the shares began their conditional trading on Wednesday morning. Reportedly, the company can still cancel the IPO and cancel any deals made until unconditional trading begins on April 7.
Deliveroo is selling 3,846,158,384 shares, equivalent to an offer size of approximately £ 1.5 billion. Of that amount, £ 1 billion would go to the company itself and £ 500 million to existing shareholders, with Amazon and Will Shaw, the company’s CEO and co-founder, among others. Those who are hired to get the most out.
The company’s shares began trading under the “ROO” index at 8am London time on Wednesday. JP Morgan And Goldman Sachs Topping the list, Bank of America Merrill Lynch, Citi, Jeffries and Nomis were also part of the union. Retail investors will not be able to trade Deliveroo shares until conditional transactions expire on April 7.
Sophie Lund Yates, stock analyst at Hargreaves Lansdown, said the Deliveroo price is “not quite as tasty as he had hoped”.
She said: “This is not very surprising given the huge noise surrounding the company.”
“The biggest concern is regulation around workers’ rights. The Deliveroo passenger flexible employee model is a huge pillar of the group’s plans for success.”
The Deliveroo IPO is the largest in the UK since e-commerce company The Hut Group raised £ 1.88 billion on the list last September. In terms of market value, this is the largest IPO to take place in London since then Glencore It was released to the public nearly a decade ago. It’s also Britain’s largest tech list by value, surpassing The Hut Group and Worldpay which debuted in 2015 before it was written off.
“I am very proud to have Deliveroo IPO in London – our home,” Shaw said in a statement. “As we reach this milestone, I want to thank everyone who helped build Deliveroo in the company as it is today – especially our restaurants, grocery stores, cyclists and customers.”
He added, “In this next phase of our journey as a public company, we will continue to invest in innovations that help restaurants and grocery stores grow their businesses, offer customers more choice than ever before, and provide passengers with more business. Our goal is to build an online food company,” We are very excited for the future to come. “
It’s a big vote of confidence in London, as the UK’s capital looks to attract high-growth tech companies and boost their financial clout after Brexit. British Finance Minister Rishi Sunak described Deliveroo as “a true British technology success story” when the company announced plans to list it in London.
However, the IPO was affected by concerns about Deliveroo’s treatment of its drivers, corporate governance and rating. Legal and public, Aberdeen Standard, Aviva and M&A – which collectively own about £ 2.5 trillion in assets under management – all avoided Deliveroo’s debut.
Each of the investment firms has expressed concerns about the gig economy in which Deliveroo is operating. Carriers wearing the company’s turquoise uniform are becoming ubiquitous in London and other cities during the coronavirus pandemic, as people switched to food delivery apps for their grocery stores.
Some Deliveroo passengers Go on strike Next Wednesday, as soon as the IPO opens to retailers, to protest against what they see as poor working conditions and low wages. For its part, Deliveroo says its drivers have the flexibility to work when they want and earn an average of £ 13 an hour during the busiest times.
But that hasn’t assuaged investor concerns about Deliveroo’s business model. Earlier this month, Uber reclassified all of its drivers in the UK as workers entitled to a minimum wage and other benefits after the country’s Supreme Court ruled that a group of drivers should be treated as workers.
This is expected to lead to Uber’s rising costs It is likely to be worth as much as $ 500 million, according to Bank of America. Investors are concerned that Deliveroo may suffer the same fate, and the company has set aside £ 112million to cover potential legal costs related to the career status of its passengers.
Meanwhile, institutional shareholders have also raised concerns about Deliveroo’s governance. The company is listed in London with a dual-share class structure, giving Shu over 50% of the voting rights.
The Deliveroo IPO will be a test of London’s tolerance for high-growth tech companies that are spending massively on large-scale growth before prioritizing profits.
It’s a talisman that gained popularity in Silicon Valley with Amazon, which was initially unprofitable for a number of years. Deliveroo continues to incur huge losses, as it reported a loss of £ 223.7m in 2020.
“Deliveroo is not profitable yet, which makes it very difficult to evaluate on a conventional basis,” Lund-Yates said.
“But a market cap of £ 7.6 billion means the company is worth 6.4 times last year’s revenue, which is slightly more than its competitor Just Eat’s 4.8 times, despite the price drop. This means there is pressure on Deliveroo to deliver the goods, or the price of Its arrow will be in the line of fire. “
The company has managed to enter the black market in recent months thanks to increased demand for food delivery.
But UK investors are wary of Deliveroo’s huge valuation of £ 7.6 billion, especially at a time when vaccines are rolling out and countries plan to reopen their economies. DoorDash, the US competitor to Deliveroo that went public last year, has a much higher market cap of around $ 42 billion.
Deliveroo Be warned that it could fail Early last year, an investment from Amazon, the largest outside shareholder, was suspended amid a review of the competition. Amazon’s stake in Deliveroo was subsequently approved by the regulators.
“The lack of massive listings in London and pent-up investor demand during the pandemic have created encouraging market dynamics for Deliveroo,” said Nalin Patel, EMEA private capital analyst at PitchBook.
“However, the near-term fluctuations facing public stocks and questions regarding workers’ rights have affected IPO prices and investor participation,” added Patel.
However, many tech companies are flocking to London to list their shares, with companies like Trustpilot and Moonpig doing so recently. A number of other companies, including Wise and Darktrace, are expected to appear later this year.
Martin Minot, a partner at Index Ventures, an early supporter of Deliveroo, said London has the opportunity to become “the go-to” of European technology rosters.
“Deliveroo is a huge gain for the capital, but there is still a lot to be done,” he said. “Compared to listing in the US, European founders are still facing more traditional investors in the public market who are not used to supporting high-growth tech companies.”