Deliveroo plunges to 30% as London start of decade turns sour

LONDON (Reuters) – Shares of Deliveroo fell 30% on their trading debut on Wednesday, slashing the company’s valuation by more than £ 2bn, slashing Britain’s ambitions to attract tech companies growing rapidly in the London market.

The eagerly awaited listing, the largest in the London market in a decade, was hailed by Finance Minister Rishi Sunak as a “true British technological achievement” that could pave the way for more initial public offerings (IPOs) by the public. technology companies.

But the beginnings had already been eclipsed as some of Britain’s biggest investment firms avoided listing, citing concerns about the working conditions of the odd-job economy and the structure of shares.

Deliveroo founder Will Shu retains his 6.3% stake, but will hold 57.5% of the company’s voting rights for three years; a structure that prevented the company from obtaining a premium listing giving companies access to the main FTSE indices.

The 390 pence price gave an overall valuation of 7.6 billion pounds ($ 10.46 billion) at the bottom of a target range.

Within minutes of the market opening on Wednesday, it lost £ 2.28 billion in value, which equity capital market bankers say could undermine the market for some Great IPOs. Brittany and Europe.

Fabian de Smet, head of investment banking at Berenberg, called it a “sector problem”.

“Investors are turning away from the work from home game and investing their money in the economic recovery game. Deliveroo found himself caught in the middle of a huge spin. It was the last old world COVID IPO, ”he said.

After hitting a low of 271 pence, the stock returned to 292 pence at 2:15 p.m. GMT. It was still down 25%, making it the worst day one performance for a London IPO – over £ 1 billion – on record, trading platform Dealogic said.

Stocks often rebound when they first enter the market, as managing banks use over-allotment, or greenshoe – a percentage of the reserved supply to stabilize the price.

Clients of Deliveroo, who have received £ 50million of shares, can only trade on April 7, when unconditional trading begins.

AMSTERDAM HIGH

The stock’s fall follows a poor run for many growth stocks. Its main peers Just Eat Takeaway.com and Delivery Hero have fallen by around 12% each over the past month.

US peer Doordash – which doubled in value when it debuted on the stock exchange last year – fell 40% last month.

But those stocks have stabilized over the past two sessions and the Amsterdam stock market hit a record high on Wednesday, dominated by tech stocks.

PANDEMIC ARROW

Deliveroo’s independent drivers have seen an explosion in demand during the pandemic, bringing food from restaurants otherwise closed to customers confined to the house.

But the Amazon-backed company suffered heavy losses; he said he reduced an underlying loss to 223.7million pounds ($ 308.93million), from 317.3million pounds in 2019.

Regardless of profitability, there has been a clamor for growth companies over the past year as the COVID-19 crisis has pushed interest rates and government bond yields to historic levels. low.

But with the rise in yields on US Treasuries, this trade has lost its appeal and many tech stocks on both sides of the Atlantic have fallen in recent weeks, raising questions about inflated valuations.

“It comes down to the question of how a company that was valued at 3 billion (pounds) in November, 5 billion in January, could possibly have a magical value of 8 to 9 billion in March – especially when, according to its own statements, it was potentially in need of emergency funding last year, ”said Russ Mold, director of investments at AJ Bell.

The London-based firm’s listing, founded in 2013, is the largest London IPO since Glencore’s in May 2011 and also the largest tech float to date on the London Stock Exchange.

Heavy investors who stayed on the sidelines included Aberdeen Standard Life, Aviva, Legal & General Investment Management and M&G.

“The number of institutions lining up to say no on the basics of ESG (environmental, social and corporate governance) has always seemed to be off to a rocky start,” said James Athey, chief investment officer at Aberdeen Standard Investments.

Goldman Sachs and JP Morgan are leading the deal, while Bank of America, Citi, Jefferies and Numis are also part of the syndicate of banks handling the deal.