The company has already lost billions in market value.
Last week, Deliveroo, a UK-based food delivery service backed by Amazon, disclosed the price range for its upcoming Initial Public Offering (IPO). The company aimed to set a new record for lucrative IPOs in the UK by pricing its shares between 3.90 and 4.60 pounds. Riding on the continued high demand for food delivery services amidst the ongoing pandemic, Deliveroo appeared primed for success.
Unfortunately, Deliveroo’s IPO not only fell short of breaking the record for the largest UK IPO, but it is also projected to be one of the worst-performing IPOs in the UK. As trading commenced this morning, the value of Deliveroo’s stock nosedived by a significant 30%, erasing about 2.3 billion pounds (approximately $3.2 billion USD) from its market capitalization almost instantly. As of now, shares are trading at around 2.86 pounds each, down by 27% from the lower end of the pricing range.
Prior to the IPO launch, prospective investors had voiced concerns regarding Deliveroo’s long-term sustainability. Given that its rapid growth was largely attributed to the pandemic, a normalization of conditions could lead to a decline in business. Moreover, despite its growth surge, Deliveroo has yet to achieve profitability, and the recent calls for better benefits for delivery drivers added further strain, overshadowing the investment potential.
Deliveroo tumbles 30% in London debut https://t.co/Gy3DzlcjFc
— Financial Times (@FT) March 31, 2021
Analyst Sophie Lund-Yates from Hargreaves-Lansdown remarked, “Forced provision of standard employee benefits such as pension contributions would strain Deliveroo’s already narrow profit margins, presenting a challenging path to profitability.”
Besides the impact on Deliveroo, this setback could have broader implications for the UK’s economic landscape. With the relocation of many major business operations from London due to Brexit, officials had hoped that Deliveroo’s success would spur more British tech firms to go public.
