Rolling coverage of the latest economic and financial news
- Latest: Deliveroo shares tumble after IPO
- Shares floated at 390p, slumped to below 300p
- Analyst: Horrible start to trading
- Concerns about workers’ rights and dual-class share structure blamed
- Top UK fund refuses to invest in Deliveroo amid City concern over riders’ rights
Earlier:
- UK GDP revised up in Q3 and Q4 2020
- But 2020 still worst year since Great Frost of 1709
The Financial Times also reckons Deliveroo’s shaky debut is a blow to ambitions to lure more British tech companies to list in the UK.
The initial public offering had given Deliveroo an opening valuation of around £7.6bn, the highest in London since resources group Glencore’s 2011 IPO, according to Dealogic data.
But the food delivery app quickly shed more than £2bn in market value in its first moments as a public company, in one of the sharpest drops for a major new listing in years.
The City’s biggest concern about Deliveroo is future regulation around worker rights, says Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
That’s because the company would find it harder to reach profitability if it was forced to guarantee more benefits to its couriers.
Related: Courts close in on gig economy firms globally as workers seek rights
The biggest concern is regulation around worker rights. The flexible employee model of Deliveroo’s riders is a huge pillar of the group’s plans for success.
If forced to offer more traditional employee benefits, like company pension contributions, Deliveroo’s already thin margins would struggle to climb, and the road to profitability would look very tough indeed. Throw in the recent developments at Uber, and general market volatility, and the net effect is one of increased anxiety. Sadly for the group, anxiety doesn’t tend to inflate share prices.
The pandemic has offered a structural growth opportunity, but it’s worth asking if lockdowns mean things are as good as they will ever be for a takeaway service. The longer-term outlook depends on how demand holds up in a post-pandemic world, and if that road to profitability looks any clearer.”
