Amazon-backed Deliveroo shares drop 30% on London stock market debut

The poor performance lowered shares of rival online food ordering and delivery company Just Eat Takeaway.com TKWY,
+ 0.39%
1.75% at the start of European trading on Wednesday.

Lily: Amazon-backed Deliveroo slashes IPO price range ahead of London debut, citing ‘volatile’ market conditions

Earlier this week, Deliveroo slashed its price range to between £ 3.90 and £ 4.10, indicating a valuation of up to £ 7.85 billion, from its initial valuation of £ 8.9 billion.

The company cited “volatile” market conditions for the decision, but the IPO was overshadowed by concerns about workers’ rights, leading several of the UK’s top fund managers, including Aberdeen Standard Life SLA,
+ 0.03%,
Aviva AV,
-0.49%,
Legal & General Investment Management and M&G, to say that they would not participate in the IPO.

Hundreds of Deliveroo runners are planning a protest next week to push for better wages and better conditions.

Lily: Big investors shy away from Amazon-backed Deliveroo’s $ 12 billion IPO amid workers rights concerns

“This is certainly a disappointing result for an initial public offering that generated a lot of enthusiasm,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a research note Wednesday. “However, the recent weakness in the share price of a number of its peers in the United States, such as DoorDash, appears to have taken some of the shine from the sector,” he added.

Sharing in the DoorDash DASH third-party delivery service,
+ 0.48%
have fallen 8.51% so far this year, according to FactSet data. Just Eat Takeaway.com shares have fallen 21.26% year-to-date as the rollout of COVID-19 vaccines raised hopes of reopening economies and returning people to restaurants .

Hewson noted that other investors may also have been deterred by Deliveroo’s two-class structure which restricts common shareholder voting rights and gives CEO Will Shu majority control over all important board decisions. during the first three years of listing.

Two-class structures are more common in the United States, where they are used by companies including tech giants Google Parent Alphabet GOOGL,
+ 0.03%
and Facebook FB,
-0.97%,
but British investors are wary of them because they give executives an inordinate influence over shareholder votes relative to the size of their holdings.

Deliveroo sold shares worth £ 1.5bn in the IPO, of which £ 1bn will go to the company itself, and £ 500m will go to existing shareholders, including Shu.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said Deliveroo has yet to make a profit, making it very difficult to assess the company on a traditional basis.

Founded in 2013, Deliveroo lost £ 244million in 2020, but revenue rose 54%, fueled by an increase in take-out orders during lockdowns from the COVID-19 pandemic in the UK and Europe. The company competes with Uber Eats and Just Eat Takeaway, which plans to increase its business in the UK.

‘But a market cap of £ 7.6 billion means the company is worth 6.4 times last year’s turnover, which is well over 4.8 times that of rival Just Eat , despite the lower price. This means that there is pressure on Deliveroo to deliver the goods, or that its stock price will be in the crosshairs, ”Lund-Yates added.

Lily: UK biotech Oxford Nanopore gears up for $ 3 billion London IPO

The poor performance of the Deliveroo flotation – which is the largest in London since the GLEN of miner Glencore,
-0.21%
in 2011, will deal a blow to the efforts of the British government to attract more technology companies to London in order to allow it to better compete with the New York or European stock exchanges such as Amsterdam and Frankfurt.

However, on Monday, UK biotech Oxford Nanopore said it was preparing for a potential $ 3 billion IPO in London later this year.