The food delivery service Deliveroo had to reduce its asking price for the IPO. Some large investors also distanced themselves from the company.
Dhe price range for the IPO this week was set too optimistically. Deliveroo reduced expectations on Monday. Last week, the start-up wanted to have 3.90 to 4.60 pounds per share for its shares. The food delivery service founded in 2013 would have been valued at up to 8.9 billion pounds (10.4 billion euros). The delivery service headed by founder Will Shu is now moving away from this and is still expecting 3.90 to 4.10 pounds per share – up to 7.8 billion pounds. Deliveroo justified the lower price range with the “volatile” market environment. Wednesday is the first day of trading.
One of the big investors in the food ordering app is Amazon, which invested half a billion pounds in the company, which was then in financial difficulties, a good year ago. Amazon has done good business with it, as the shares could be worth up to £ 860 million. Overall, the IPO Deliveroo is expected to bring in more than a billion in fresh money. It will be the largest IPO in years for the London Stock Exchange.
However, some major institutional investors such as Aviva, Aberdeen Standard, M&G and Legal & General have announced that they will not participate. They gave different reasons for this. Some are bothered by the fact that the company issues different shares and that Shu’s shares have twenty times as many voting rights as others. But there are also doubts about Deliveroo’s business model. The food delivery service, founded in 2013, has grown rapidly. But he’s still making losses, more than £ 220 million in 2020, despite Delivero making a big leap in sales in the pandemic year. Dubious working conditions also play a role for Aberdeen Standard and Aviva. It’s about working hours and wages.
The company is currently well represented in twelve countries, especially Great Britain. In total, it has contracts with more than 120,000 restaurants in 800 cities. Deliveroo also supplies supermarkets such as Waitrose, Aldi and Carrefour. The well-known tech investor James Anderson from the Scottish Mortgage Investment Trust was only “lukewarm” interested in Deliveroo because it is too focused on London and other markets are growing rather weakly.
Another weak point could be the legal status of the up to 100,000 food couriers who formally work as independent contractors for Deliveroo. The UK High Court recently ruled that the Uber driver service must treat its drivers as employees rather than self-employed, and that they are entitled to minimum wages and vacation pay. According to a sample survey by a small UK union of 300 Deliveroo couriers, a third of them were on less than the minimum wage.
The success story of the American food delivery service Doordash, which went public in New York four months ago, has sparked the imagination of some investors. His shares shot up by up to 80 percent on the first day. after the peak with a market valuation of well over 60 billion dollars, the share has lost around a third of its value.