Deliveroo gets cold shoulder from investors
Deliveroo had a rocky ride as its shares began trading on the London Stock Exchange, with the stock falling by as much as 30 per cent at one stage.
The takeaway delivery firm opened trading below 270p per share, having said it would launch its shares as a publiclylisted firm at 390p earlier on Wednesday morning.
Priortotrading,deliveroohad also confirmed that it would be valued at around £7.6 billion, at the bottom of its previously announced range of between £7.6bn and £8.8bn. However, this fell back as City analysts raisedconcernsaboutthebusiness.
The cold opening to trading came after a number of UK fundmanagerssaidtheywould rejectthelistingamidconcerns over workers’ rights issues and its shareholder structure.
Deliveroo founder and chief executive Will Shu said: “I am very proud that Deliveroo is going public in London – our home.
“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.
“Inthisnextphaseofourjourneyasapubliccompanywewill continuetoinvestintheinnovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work.
“Our aim is to build the definitive online food company and we’re very excited about the future ahead.”
AJ Bell investment director Russ Mould said: “Deliveroo has gone from hero to zero as the much-hyped stock market debut falls flat on its face. It had better get used to the nickname ‘Flopperoo’.
“With Deliveroo, one must question if the knee-jerk reaction we saw at the market open issimplyashort-termissueand if investors who like the longterm growth opportunity will flock to buy stock at the even cheaper price.
“There are multiple ways of looking at the business. Bulls willsaythepandemichasmade online food ordering part of everyday life and this trend will remain intact once life returns to normal. Bears will say it is a highlycompetitivespace,deliveroo doesn’t make any money andthattakeawayorderingvolumes will ease once the pandemic ends.”
Professor John Colley, associate dean of Warwick Business School, noted: “It is little surprise that investors appetite is limited for the Deliveroo IPO [initial public offering]. It is a narrow margin loss-maker that is likely to face higher costs due to worker’s rights across Europe.
“There are also concerns as to whether this type of business model can ever return much profit. It would have to deliver alotofmealsathighmarginsof which there is no sign yet.”
Last week, some of the UK’S largest fund managers, including Legal & General and Aviva, said they would reject the flotation, highlighting issues related to its business model, workers’ rights and regulatory concerns.
Firms have also raised concerns over the share structure, which will see Shu have 20 votes per share, compared with one per share for other investors.