London Investors Turn Sour On Deliveroo Debut

Shares in Deliveroo plunged by as much as 30 percent in their trading debut on Wednesday, slicing more than US$2 billion off the company's valuation in a blow to Britain's ambitions to attract fast-growing tech companies to the London market.

The highly-anticipated listing, the biggest on the London market in a decade, had been hailed by finance minister Rishi Sunak as a "true British tech success story" that could clear the way for more initial public offerings (IPO) by technology companies.

But the debut had already been overshadowed as some of Britain's biggest investment companies shunned the listing, citing concerns about gig-economy working conditions and the share structure.

Deliveroo founder Will Shu is retaining his 6.3 percent stake, but will have 57.5 percent of the voting rights of the company for three years; a structure that meant the company could not obtain a premium listing that gives companies access to the main FTSE indices.

The 390 pence price tag gave an overall valuation of 7.6 billion pounds (US$10.46 billion) at the bottom of a target range.

Within minutes of the market opening on Wednesday, it lost 2.28 billion pounds of its value, which equity capital markets bankers said could undermine the market for some IPOs in Britain and Europe.

Fabian de Smet, head of investment banking at Berenberg, called it a "sector problem".

"Investors are turning away from the work-at-home play and putting their money into the economic recovery play. Deliveroo got caught in the middle of a huge rotation. It was the last IPO of the old Covid world," he said.

Having hit a low of 271 pence, the stock recovered to 292 pence by early afternoon. It was still down 25 percent, making it the worst first-day performance for a sizeable London IPO on record, markets platform Dealogic said.

Deliveroo customers, who were allocated 50 million pounds of shares, are only able to trade on April 7, when unconditional trading begins. (Reuters)