It was supposed to be the most successful debut of recent years on the London market, but the expected listing of Deliveroo has turned into a flop. The first opening price, which is generally always higher than the one set by the company, dropped by 30% in the first hours of trading. One hour from the close of the session, shares in the food delivery giant are still down 10%. The move of recent days to revise the Ipo price fork downwards has therefore been of little use. Deliveroo had lowered the values in the range from 3.90 – 4.60 pounds to 3.90 – 4.10 pounds, an operation that was expensive because if initially the estimated value for the post-listing company was set at 8.9 billions of pounds (10.4 billion euros) after the downward revision the level had fallen to 7.8 billion pounds. The company justified the decision with market volatility. Today, in the middle of the morning, the valuation was around 7.6 billion pounds, about 9 billion euros. The shares plunged quickly in early trading, slipping from the 3.9 pounds per share on the placement to as low as 2.78 pounds, before climbing back just below the 2.9 pounds mark.
The trend could be linked to the recent claims of riders asking for more protections and more pay. According to what Bloomberg reported a few days ago, some of the City’s top asset managers have raised concerns that Deliveroo would not fit into the socially sustainable investment schemes. This aspect would exclude the company’s stocks from the investment funds of the large investment houses.
Deliveroo was founded in 2013 by Will Shu, starting from London. The founder’s idea was something of a reaction to the difficulty of finding restaurants willing to deliver food at his office in the City, where he worked as a financial analyst. Born in 1979, Shu was inspired by the delivery model of Amazon, a company that 6 years later would have bought 16% of the London company. Like many companies in the industry, Deliveroo has struggled to find its way to revenue. Then the thrust of the pandemic, with lockdowns that have led to a net doubling of home food deliveries. Despite Covid-19, however, the company closed the 2020 financial statements with a net loss of 226 million pounds, mainly due to an increase in management costs and new hires of riders in each of the 13 countries in which it operates. “Deliveroo has yet to start making profits, and this makes its valuation under traditional IPO schemes very complex,” commented Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.
The listing of the food delivery giant had as its objective the raising of capital necessary to beat the competition of the other giants in the sector, such as Just Eat and Uber Eats, while Amazon, which tried to break into this market segment in 2016, shortly before of the investment in Deliveroo, he abandoned his plans. At the center of discussions on the future of food delivery remains the controversy over riders: “Deliveroo will have to face more controls in the future, also because it is now a listed company,” said Frances O’Grady, head of the British trade union group Tuc.