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Stock tumbled by 30pc in early trading after the company priced shares at the lower end of its IPO range.
Shares in food delivery start-up Deliveroo have sank in the company’s stock market debut.
It began trading on the London Stock Exchange at 8am this morning (31 March), with shares down by around 30pc in early trading compared to the issue price.
The company priced its shares this week at £3.90, giving it an expected valuation of £7.59bn. This is just below the lower end of the IPO range it gave last week, where the company tipped that it could be valued at up to £8.8bn.
Analysts have said one of the reasons for this drop could be concerns about the company’s working practices and its gig-economy model. In a note to investors, Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said Deliveroo’s price “isn’t quite as tasty as it was hoping for”.
“The biggest concern is regulation around worker rights,” she added. “The flexible employee model of Deliveroo’s riders is a huge pillar of the group’s plans for success.”
Still, it marks one of the biggest IPOs on the London Stock Exchange in recent years. The Financial Times reports that £7.6bn would be the highest opening valuation in London since Glencore’s IPO a decade ago.
The public listing comes after a turnaround for Deliveroo, which was founded in London in 2013. It lost nearly £224m in 2020 but this marked a narrowing in losses, while the company saw transactions soar as demand for takeaways was boosted by pandemic lockdowns.
Amazon-backed Deliveroo is looking to raise £1bn from the IPO and said it intends to use the net proceeds to continue investing in growth opportunities in the food delivery market.
“I am very proud that Deliveroo is going public in London – our home,” said the company’s founder and CEO, Will Shu, who is set to be the big individual winner from this IPO.
“In this next phase of our journey as a public company we will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work,” he added.
“Our aim is to build the definitive online food company and we’re very excited about the future ahead.”
