U.K. food delivery startup Deliveroo entered the London Stock Exchange market this week, but seems to have failed to impress.
Listing itself as Deliveroo Holdings Plc., the Amazon-backed company initially priced its shares at 3.90 pounds (~$5.36), which gave it an expected valuation of 7.6 billion pounds (~$10.5 billion), saw its shares drop by 30 percent; by market closing time, shares fell by 26 percent and its share price fell as low as 2.73 pounds.
Leading the company’s IPO were JPMorgan and Goldman Sachs; Deliveroo was the biggest company to go public in London since Glencore, a mining group, did so in 2011.
“I am very proud that Deliveroo is going public in London – our home,” said CEO and co-founder Will Shu in a statement.
“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.”
Many experts say that its failed stock market debut stems from its current business model. Over the last year, food delivery services skyrocketed due to the COVID-19 pandemic, but some feel that once we return to normalcy, the boom will fade away.
Additionally, investors in the UK showed concerns over the company’s planned dual-class share structure. This move—which Deliveroo plans to follow for the next three years—would give Shu more control of the company and more voting rights over other investors; it also means that the company would not be eligible for a “premium” listing that would allow it to join other FTSE indices.
Legal Battle with Gig Workers
Along with the aforementioned concerns from investors, Deliveroo has been in a bit of hot water regarding its riders.
Russ Mould, an investor at AJ Bell, revealed that some fund managers backed out of the IPO due to concerns surrounding the company’s working practices.
“This is likely to have spooked a lot of people who applied for shares in the IPO offer, meaning they are racing to dump them,” he said.
On April 7, the day that unconditional trading begins for Deliveroo, hundreds of the company’s riders plan to go on strike in protest of its current approach to workers’ rights in regards pay and overall conditions.
The Independent Workers’ Union of Great Britain (IWGB) urged potential Deliveroo investors to consider the food delivery service’s business model before making any moves. From this, Legal & General Investment Management, Aviva Investors, and Aberdeen Standard Investments announced that they would not participate in the IPO.
IWGB President Alex Marshall said: “Investing in Deliveroo means associating yourself with the exploitative and unstable business model that it champions and has set aside millions to defend. It means signing up to support a company condemned across parliament during the pandemic for endangering public health and for clapping and then scrapping key workers without due process.”
In February, the U.K. Supreme Court ruled that Uber—who has been dealing with similar protests across the pond—must classify its drivers as employees rather than independent contractors; this includes providing them with a minimum wage, holiday pay and pensions.