The meal delivery company Deliveroo has chosen London as the venue for its planned $7bn (£5bn) stock market listing after the UK government committed to rule changes that will allow founders to keep more control.
The chancellor, Rishi Sunak, announced the completion of a review of listing rules in Wednesday’s budget that would result in some restrictions being eased. There have been concerns that London is lagging behind rivals in attracting flotations.
Deliveroo coordinated its announcement on plans to list in London with the government.
The London-headquartered company has been growing rapidly. In January it raised $180m, giving the company a $7bn valuation and confirming its status as one of the UK’s leading tech “unicorns” – privately held startups valued at more than a $1bn. The investment by existing shareholders was led by Durable Capital Partners and Fidelity.
Deliveroo was founded in 2013 by Will Shu, who spotted a gap in the market while working at an investment bank in London.
Deliveroo said it would use a “time-limited dual-class share structure” to give Shu more control, in line with the listing review’s recommendations. It added that this would provide the 41-year-old “stability to take decisions to enable the company to execute on its long-term strategic vision in order to create long-term shareholder value”.
The dual-class structure will be limited to three years, after which the company will move to a traditional single-share class structure.
Similar dual-class shareholding structures are already common in the US, particularly in tech companies such as Facebook or Google’s parent, Alphabet. But some governance experts are sceptical of the benefits of different share classes, which can deprive shareholders in the secondary class of control over the company they own.
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In the UK, The Hut Group, a founder-led technology and retail company, has been excluded from the main FTSE stock indices because of a similar structure, despite being one of the largest British public companies.
The listing changes have not technically been confirmed yet, and will be subject to consultation by the Financial Conduct Authority, the City regulator. However, they are unlikely to face major difficulties.
Sunak said he wanted to improve the UK’s reputation for hosting stock market listings in light of its departure from the EU’s single market at the start of the year. He said he wanted to “encourage even more high-growth, dynamic businesses to list in the UK” and described Deliveroo as “a true British tech success story”.
