Deliveroo is an online food delivery company founded by Will Shu in 2013 in London, England. It operates in over two hundred locations across the United Kingdom, the Netherlands, France, Belgium, Ireland, Spain, Italy, Australia, New Zealand, Singapore, Hong Kong, the United Arab Emirates, and Kuwait. Its subsidiary operation, Deliveroo Editions, focuses on growing a network of ghost kitchens—kitchens located off-site from restaurants to prepare delivery-only meals. Deliveroo has not yet made a profit. It was listed on the London Stock Exchange on March 31 2021, as Deliveroo Holdings Public Limited Company.
Shares of British food delivery start-up Deliveroo plunged in its stock market debut Wednesday, as the company faces pressure from top investors and trade unions over workers’ rights. Deliveroo, which Amazon backs, saw its shares sink around 30% in early deals than the issue price before trimming some losses. Shares were down 26% by the market close. The company priced its shares at £3.90 ($5.36) Tuesday, giving it an expected market value of £7.59 billion, which was at the bottom end of its IPO target range.
But the company’s share price fell as low as £2.73 Monday as shares began conditional trading Wednesday morning on the London Stock Exchange, wiping approximately £2 billion off its valuation. The company can still cancel the IPO and void any trades made until unconditional trading starts on April 7. Deliveroo sold 384,615,384 shares, equating to an offer the size of approximately £1.5 billion. Of that, £1 billion will go to the company itself, and £500 million will go to existing shareholders, with Amazon and Will Shu, the company’s CEO and co-founder, among those set to gain the most.
The company’s shares began trading under the ticker “ROO” at 8 a.m. London time on Wednesday. JPMorgan and Goldman Sachs led the listing, while Bank of America Merrill Lynch, Citi, Jefferies, and Numis were also part of the syndicate. Retail investors won’t be able to trade Deliveroo shares until conditional dealings end on April 7. Three hedge funds bet against Deliveroo’s stock Wednesday with short positions, according to two people familiar with the matter who preferred to remain anonymous as the details haven’t been made public. Short selling is a strategy in which an investor sells borrowed shares and repurchases them in the future at a lower price, the aim being to pocket the difference if the stock price declines.
Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said that Deliveroo’s price “isn’t quite as tasty as it was hoping for.” “This isn’t hugely surprising given the substantial background noise surrounding the company,” she said. “The biggest concern is regulation around worker rights. The flexible employee model of Deliveroo’s riders is a huge pillar of the group’s plans for success.”
Deliveroo’s IPO offer is the largest in the U.K. since e-commerce firm The Hut Group raised £1.88 billion in a listing last September. In terms of market cap, it is the biggest IPO in London since Glencore went public nearly a decade ago. Britain’s largest-ever tech listing by value surpassed that of The Hut Group and Worldpay, which debuted in 2015 before delisting. “I am very proud that Deliveroo is going public in London — our home,” said Shu in a statement. “As we reach this milestone, I want to thank everyone who has helped to build Deliveroo into the company it is today — in particular our restaurants and grocers, riders and customers.” He added: “In this next phase of our journey as a public company, we will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work. We aim to build the definitive online food company, and we’re very excited about the future ahead.”
It’s a significant vote of confidence in London, as the U.K. capital looks to attract high-growth tech companies and boost its financial clout after Brexit. British Finance Minister Rishi Sunak described Deliveroo as a “true British tech success story” when the company announced plans to list in London. However, the IPO has been hit by concerns over Deliveroo’s treatment of its drivers, governance, and valuation. Legal and General, Aberdeen Standard, Aviva, and M & M&A — which collectively have about £2.5 trillion in assets under management — have shunned Deliveroo’s debut.
Deliveroo’s IPO will be a test of London’s tolerance for high-growth tech companies that spend heavily on growing at scale before prioritizing profits. It’s a mantra that gained popularity in Silicon Valley with Amazon, which had initially been unprofitable for several years. Deliveroo remains heavily lossmaking, having reported a loss of £223.7 million in 2020. “Deliveroo is yet to turn a profit, which makes it very difficult to value on a traditional basis,” said Lund-Yates. “But a market cap of £7.6 billion means the company’s worth 6.4 times last year’s revenue, which in some way above rival Just Eats 4.8 times, despite the lower price. That means there’s pressure for Deliveroo to deliver the goods, or its share price will be in the firing line.”
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