- UK food delivery app Deliveroo saw its share price nosedive by as much as 30% during its first day of trading on the London Stock Exchange yesterday.
- Within minutes of the market opening, Deliveroo saw £2.28 billion ($3.14 billion) shaved off of its IPO valuation of £7.6 billion ($10.5 billion), or £3.90 per share.
- The stock closed the day at £2.87 – down 26.3% from its debut price. According to financial content platform Dealogic, it was the worst ever first-day performance for a £1 billion-plus London IPO.
Why it matters:
Deliveroo’s float was one of the most hotly anticipated of the year so far, with the UK government touting it as a path for more tech companies to IPO in the country.
The Amazon– and Fidelity-backed app has faced criticism over its treatment of drivers, who have previously held strikes over alleged poor working conditions, low pay, and lack of holiday and sickness provisions.
This – coupled with the fact that Deliveroo still operates at a loss – apparently led several big-name investors to stay away from the IPO.
“The number of institutions lining up to say ‘no’ on ESG [environmental, social, and corporate governance] grounds always looked like it was going to make it a tricky debut,” James Athey, investment director at Aberdeen Standard Investments, told Reuters.
“How could a company that was valued at £3 billion in November, £5 billion in January, be magically worth £8 billion in March – particularly when, according to its own statements, it was potentially in need of emergency funding last year,” said AJ Bell investment director Russ Mould.