Deliveroo is targeting a price tag of as much as $10 billion (€8.3 billion) in its initial public offering, according to people briefed on discussions at the food delivery group, giving London its most valuable new listing for several years.
If the London-based company completes the float at the top of its target range, giving it a market capitalisation of more than £7 billion, Deliveroo would be worth more than Sage, one of the few FTSE 100 tech companies, and The Hut Group, the ecommerce group that did the largest UK IPO for five years in 2020.
In a private financing in January Deliveroo was valued at about $7 billion, a figure that had already doubled since an Amazon-led investment in 2019.
The pandemic supercharged demand for food delivery services as lockdowns closed restaurants, driving DoorDash – the US food delivery service that Deliveroo closely resembles – to a $60 billion valuation at December's IPO in New York. Just Eat Takeaway. com, Deliveroo's closest European rival, is currently valued at £10.1 billion (€11.7 billion) on the FTSE 100.
However, people close to Deliveroo warned that the stock market volatility of recent days could yet reduce the price at which its shares are offered to investors, a process expected to begin in the coming weeks. “There is a lot of movement, it’s very early days,” said one.
A Deliveroo spokesperson declined to comment on its prospective valuation.
Deliveroo said earlier on Thursday that it had chosen London for its highly anticipated IPO after Rishi Sunak, the UK chancellor, endorsed an overhaul of listing rules to allow founders to retain more control after going public.
The decision hands the City a much-needed win over New York and Amsterdam at a time of feverish activity in new tech listings.
"Deliveroo is proud to be a British company, and the selection of London as its home for any future listing reflects Deliveroo's continued commitment to the UK," said Claudia Arney, Deliveroo's chair.
Obvious venue
London has long been seen as the obvious venue for Deliveroo to list given the food delivery service was founded there in 2013 and the UK is its largest market.
But many European internet companies are looking to New York, where US investors have rewarded new tech listings such as DoorDash and Airbnb with higher valuations than some entrepreneurs feel they could get in London. In the aftermath of Brexit, Amsterdam has also lured high-growth IPOs including InPost, which operates a network of parcel lockers for online retailers.
Deliveroo’s decision follows the publication on Wednesday of a review by Lord Jonathan Hill, former EU financial services commissioner, which recommended a wide range of reforms to loosen listing rules in the UK.
The new listing rules are unlikely to come into force before Deliveroo has completed its IPO, for which initial paperwork is expected as soon as next week. But the new rules will allow the company to eventually graduate to the London Stock Exchange’s premium listings segment without Will Shu, Deliveroo’s US-born co-founder and chief executive, having to sacrifice control.
Among Lord Hill’s recommendations were allowing companies on the London Stock Exchange’s “premium” segment to use dual-class share structures, which let founders hold on to extra voting rights after an IPO.
The dual-class arrangement is popular in Silicon Valley, where Facebook chief Mark Zuckerberg and Google's founders Larry Page and Sergey Brin benefit from such schemes.
Mr Sunak endorsed the plan during Wednesday’s UK budget. The move was designed to attract fast-growing tech companies such as Deliveroo, though some London fund managers fear the change puts shareholder protection at risk.
Deliveroo said in a statement on Thursday morning that its dual-class structure would be “closely in line” with the Hill review’s recommendations and be limited to three years.
“Alongside the dual-class share structure, Deliveroo intends to have a strong commitment to corporate governance standards including a majority independent board of directors as well as upholding diversity standards,” the company said.
More tech companies
Companies with dual-class structures can already trade on the LSE’s standard market. Once the new rules are in place, Deliveroo would be able to move up to a premium listing. A person close to the company said that the Hill review was also likely to attract more tech companies to London, making it more attractive as a listing venue overall.
Mr Shu said he was “proud and excited” to list in London. Mr Sunak hailed his decision as “fantastic”, calling Deliveroo a “true British tech success story”. “It is great news that the next stage of their growth will be on the public markets in the UK,” the chancellor said in a statement. – Copyright The Financial Times Limited 2021
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