Deliveroo will price its highly anticipated initial public offering towards the bottom of its intended range because of what it called “volatile” market conditions, despite seeing “very significant demand” from investors.
The multibillion-pound listing has been held up as a big moment for European start-ups and for the London stock market, which has suffered a dearth of new tech listings in recent years. But Deliveroo is also facing a protest from several big UK investors who have refused to participate in what could be London’s biggest IPO in a decade over regulatory concerns.
Just a week ago, the London-based food delivery company said it intended to price its offering at between £3.90 and £4.60 per share, implying a market capitalisation of as much as £8.9bn — ahead of the $10bn (£7.2bn) valuation that had previously been mooted internally.
But on Monday morning, Deliveroo said it had narrowed that range to between £3.90 and £4.10, indicating a valuation of £7.6-7.85bn.
Deliveroo said it wanted to price “responsibly” to ensure “long-term value” for investors buying in at the IPO, which includes a £50m allocation for its own customers.
Final pricing will be determined on Wednesday morning, before it begins trading on the London Stock Exchange’s main market under the symbol “ROO”.
Last week, a backlash erupted among some of the UK’s largest asset managers — including the investment arms of Aviva, Aberdeen Standard and Legal & General — over Deliveroo’s business model, working practices and regulatory risk. A survey of more than 300 of its couriers by the Bureau of Investigative Journalism and the Independent Workers Union of Great Britain found that a third were paid less than the minimum wage.
But Deliveroo insisted on Monday that its conservative pricing decision was instead down to the poor performance of other IPOs and broader stock market volatility over the past week. It still plans to raise around £1bn from new stock issued in the IPO, while existing investors — including Amazon.com and Deliveroo founder Will Shu — are expected to together sell shares worth more than £500m.
“Deliveroo has received very significant demand from institutions across the globe,” Deliveroo said. “The deal is covered multiple times throughout the range, led by three highly respected anchor investors. Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”
After a strong start to 2021 for new listings, especially among so-called “blank-cheque” firms in the US, choppy trading conditions did not deter more companies from unveiling their plans to go public last week, including WeWork and software company UiPath.
But last week’s IPOs have so far underwhelmed. Zhihu, a Chinese question-and-answer site, fell 11 per cent on its first day of trading in the US on Friday, while cloud computing provider DigitalOcean ended the week 11 per cent below Wednesday’s IPO price.
Shares in Trustpilot, the most recent tech company to list in London, initially surged when they first began trading on Tuesday morning but by Friday had closed flat on their 265p offer price.
DoorDash, the food delivery group that is Deliveroo’s closest comparator in the US, saw its shares jump more than 80 per cent from their $102 IPO price on their first day of trading in December. But after topping out above $200 in mid-February, DoorDash shares have lost a fifth of their value over the past month, closing at $134 on Friday.