Deliveroo serves up the details for its IPO

Leading broadcaster and financial commentator Susannah Streeter who has anchored flagship business news programmes on TV and radio and hosted major summits, conferences and events, around the world, reports on the background to the Deliveroo IPO.

Susannah Streeter, TV presenter, keynote speaker, event moderator, event host and MC
home food delivery

‘’Deliveroo has served up details of its initial public offering which it’s delivering on the London market with a focus on offering its customers the first slice of the shares.

Deliveroo has said its recipe will involve selling shares for around £3.90 to £4.60 each valuing the company at between £7.6 billion and £8.8 billion.

This is towards the upper end of expectations given that in January an investment round, which saw the company gain a £129 million investment, put a value on the company of around £5 billion.

Deliveroo has yet to make a profit but the company has pointed to its strong trading during the pandemic, which saw the value of transactions rise by 121% between January and February last year and the same two months in 2021.

However this has come at a time when restaurants have been closed for months and Deliveroo has clearly had a Covid boost as diners switched from eating out to ordering in dishes from restaurants at home.

Although this insatiable demand for takeout food isn’t likely to fully unravel there is inevitably going to be a drop in demand as diners seize the opportunity to book tables at their favourite eateries when restrictions do ease.

Competition in the sector is also fierce, and Deliveroo competes with Uber Eats, Just Eat and a host of others. Just Eat has already announced its intention to ramp up operations in the UK. Until now it’s been focused on just offering the delivery platform but now it will be scaling up its delivery fleet of riders over the coming year. Just Eat takeaway has also pledged to stop using the gig economy model and offer UK workers hourly wages, sick pay and pension contributions. This is in stark contrast to Deliveroo which has so far seen off challenges in the courts to its self-employment model.

But the winds of change are blowing through the sector following Uber’s decision last week to reclassify its UK drivers as workers, although it won’t apply to its Uber Eats model, for now at least. However it’s clear the challenge to Deliveroo’s contractor model is likely to continue, and the European Commission is set to draw up new legislation governing how the gig economy model works across the bloc. If it is forced to change the way it classifies its riders in the future, it is likely to puncture its profits prospects, and could even derail the delivery giant.

We are pleased to see this offer is not being restricted to institutional investors, unlike many other highly sought after IPOs of recent months. Although it is a little disappointing a wider range of retail investors will not be able to get involved initially, the company clearly wants reward its customers for their support.

We see the customer offer as positive as we have been calling for IPOs to be widened to allow small investors to take part.

Deliveroo is expected to adopt a dual-class share structure when it lists. People need to be aware if they invest under these terms they don’t have the same voting rights as they would do if they owned shares in other companies listed on the London market.

It is a similar picture with what happened when The Hut Group listed in August last year. It became the biggest float since Worldpay in 2015, but its limited free float and the founder share held by executive chairman Matthew Moulding prevents the shares from qualifying for inclusion in FTSE 100 where it otherwise would be given its market capitalisation.

However if the recommendations in the Hill review of IPO listings in London are brought in, it is likely that Deliveroo would be able to move up to a premium listing. However under the recommendations there would still be limitation to this. Dual class shares would be allowed only for five years and the maximum voting ratio would be 20:1.”

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