Shares in Deliveroo plunged by as much as 30 per cent in their trading debut on Wednesday, slicing more than £2 billion off the company's valuation in a blow to Britain's ambitions to attract fast-growing tech companies to the London market.
The highly-anticipated listing, the biggest on the London market in a decade, had been hailed by chancellor Rishi Sunak as a “true British tech success story” that could clear the way for more initial public offerings (IPO) by technology companies.
But the debut had already been overshadowed as some of Britain’s biggest investment companies shunned the listing, citing concerns about gig-economy working conditions and the share structure.
Deliveroo founder Will Shu is retaining his 6.3 per cent stake but will have 57.5 per cent of the voting rights of the company for three years; a structure that meant the company could not obtain a premium listing that gives companies access to the main FTSE indices.
The 390p price tag gave an overall valuation of £7.6 billion at the bottom of a target range.
Within minutes of the market opening on Wednesday, it lost £2.28 billion of its value, which equity capital markets bankers said could undermine the market for some IPOs in Britain and Europe.
Fabian de Smet, head of investment banking at Berenberg, called it a “sector problem”.
“Investors are turning away from the work-at-home play and putting their money into the economic-recovery play. Deliveroo got caught in the middle of a huge rotation. It was the last IPO of the old Covid world,” he said.
Having hit a low of 271p, the stock recovered to 292p by mid-afternoon. It was still down 25 per cent, making it the worst first-day performance for a sizeable London IPO – above £1 billion – on record, markets platform Dealogic said.
Shares often rebound during their market debuts as the managing banks make use of the over-allotment or greenshoe – a percentage of the offer reserved to stabilise the price.
Trade
Deliveroo customers, who were allocated £50 million of shares, are only able to trade on April 7th, when unconditional trading begins.
The stock's fall follows a poor run for many growth stocks. Its main peers Just Eat Takeaway. com and Delivery Hero, have fallen around 12 per cent each in the past month. US peer Doordash – which doubled in value on its stock market debut last year – has fallen as much as 40 per cent over the last month.
However, those stocks have steadied in the last two sessions, and the Amsterdam stock exchange hit a record high on Wednesday, led by tech stocks. – Reuters
