Deliveroo has narrowed the price range for its upcoming initial public offering, blaming “volatile” market conditions.
The food delivery app announced on 15 March that it was seeking to float on the London market, and set a price range of between £3.90 and £4.60 per share, implying an estimated market capitalisation of up to £8.8bn.
On Monday, the firm – which was co-founded by chief executive William Shu – said it had received “very significant demand” from institutions since then, with the deal covered “multiple times throughout the range, led by three highly-respected anchor investors”.
But it added: “Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”
It has therefore limited the price range to between £3.90 and £4.10 a share, reducing the valuation to between £7.6bn and £7.85bn.
A number of large City investors, including Legal & General Investment Management, M&G and Aberdeen Standard, are swerving Deliveroo’s IPO. Concerns have been flagged by the company’s use of so-called gig economy workers and its decision to use dual-class share structure.
Under the unusual structure, Shu will hold a stake worth around £500m and retain 57% of voting rights once Deliveroo lists. Dual-class shares are rare in the UK but were recently endorsed by chancellor Rishi Sunak as part of a range of recommended changes to British listing rules.
LGIM has said it will push the Financial Conduct Authority to ensure Deliveroo is not included in premium indices, which would force it to invest in the firm through its passive investment business.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “It’s likely initial orders for the IPO have come in nearer the bottom of the target range, and by setting its sights nearer those prices, it is managing expectations on its ride to listed status.
“It may be blaming volatile market conditions, but the rejection of the IPO by a slew of institutional investors is likely to also have caused some concern at the delivery company.
“Review site Trust Pilot has seen its share price slide after the initial pop. It priced its offering at the very top of the range. Doordash, listed in New York, has also seen its valuation slide sharply from its February high. Deliveroo, already facing criticism over the working conditions of its riders, doesn’t want to puncture the prospects of a successful launch.”