Food delivery giant Deliveroo announced the pricing of its initial public offering at £3.90 per share on Wednesday, giving the company a market capitalisation of approximately £7.59bn.
However, while shares in Deliveroo started trading on the London Stock Exchange early on Wednesday, they got off to a horrible start on the market, declining as much as 23% at one point in early trade to £2.95.
Aviva Investors had previously said it would not buy shares in Deliveroo’s flotation because of risks posed by the company’s treatment of its workers, with the risk to gig economy companies’ business models increasing earlier in March when Uber lost a long-running legal battle and was required to award its drivers basic employment rights such as the minimum wage and holiday pay.
Legal&General also said it would shun Deliveroo’s flotation on the London Stock Exchange, joining Aviva and the likes of BMO Global, CCLA and Aberdeen Standard – all of which already said they were put off by the working conditions of Deliveroo’s riders.
Markets.com’s Neil Wilson said: “It’s a very big early move lower and there will be chatter about what this says about the broader market, investor appetite for listings, the state of the UK economy etc, etc. So what does it mean?
“Firstly, I’m sightly surprised there is not more of a stabilisation effort here. It reflects the cautious approach big funds have shown to the stock amid concerns about working practices and governance. A lot of the big UK funds are not on side, which was failure number one. Will Shu could have avoided that by going for a premium listing and eschewing the tech stock desire for a dual-class structure that leaves power with the founder. Old City habits die hard, despite what the FCA wants to do.”
Wilson added that he believes the chief reason for the slump was the fact that even pricing its IPO at the bottom of the range, Deliveroo demanded “too high a price tag for a loss-making delivery platform in a very competitive space with a questionable path to profitability”.
“The books were covered, it was just plain mispriced,” he concluded.
As of 0905 BST, Deliveroo shares were down 8.04% at 304.0p.
