Amazon-Backed Deliveroo Makes London Market Debut with 30% Fall in Price

Deliveroo Holdings PLC, a food delivery service backed by Amazon.com Inc (NASDAQ: AMZN), went live under the ticker “Roo”. However, the Deliveroo debut was not all impressive as the shares underwent a 30% fall in price. Deliveroo has floated 384,615,384 shares in the market with each share going for £3.90 or $5.36. This means the offered size is around £1.5 billion, sending the company’s value to £7.5 billion. Shockingly, the shares were hit hard by the negative factors of the market sending its price to £2.7.

For now, retail investors will have to wait for the end of the conditional dealing on April 7 to be able to purchase the shares. In terms of the profit dispersion, the £1 billion of the expected £1.5 billion will go to the Deliveroo company and the existing shareholders including Amazon and Will Shu, CEO of Deliveroo, will get the lion share of the remaining £500 million. 

The poor performance of the Deliveroo debut is highly linked to the treatment concerns of its drivers, their governance, and valuation. Several companies which include Aberdeen Standard and others with £2.5 trillion assets under management have shown no interest in Deliveroo. 

According to them, there is a huge concern about the gig in which Deliveroo operates. In addition to the agitations and concerns that affected its shares, it has been reported that the Deliveroo drivers plan on going on strike next week Wednesday to oppose the low salary and poor working conditions. 

The company is said to have stated that they give enough flexibility to workers and issue an average payout of £13 per hour in their busiest period.

Deliveroo will be listed in London, though institutional shareholders are not also satisfied with its governance. Shu will get a voting right of more than 50% in the dual share class structure. 

Deliveroo has recently been on an upward movement due to the high demand for food delivery. In 2020, they struggled a lot with a loss of £223.5 million. The company revealed that things would have been worse after the largest shareholder, Amazon put its investment on hold pending a competition review. The EMEA Private Capital Analyst at Pitchbook, Nalin Patel stated that the company has had several factors that encouraged its market dynamic. 

“However, near-term volatility facing public equities and questions surrounding workers’ rights have impacted IPO pricing and investor participation,” he added.

Rishi Sunak, the British Finance Minister is one of the people excited about the announcement of Deliveroo being considered to be listed in London. According to him, this is a true British tech success story. London is a place of attraction to high-growth tech companies, and it is expected that the addition of Deliveroo will test its tech tolerance environment.