Shares in Deliveroo plunged by as much as 30 percent in their trading debut on Wednesday, slicing more than 2 billion pounds 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 British 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.
The 390 pence price tag gave an overall valuation of 7.6 billion pounds ($10.46 billion) and was already set 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 289 pence by 11:30 GMT.
Shares often rebound on their market debuts as the managing banks make use of the over-allotment, or greenshoe — a percentage of the offer reserved to stabilize the price.
One trader, speaking on condition of anonymity, told Reuters he had seen no buyers for the stock at 10:00 GMT.
Deliveroo customers, who were allocated 50 million pounds of shares, are only able to trade on April 7, when unconditional trading begins.
US peer Doordash — which doubled in value on its stock market debut last year — has fallen as much as 40 percent over the last month.
A source familiar with the Deliveroo deal, asking not to be named, said it was not just about one day’s trade and the company had raised 1 billion pounds to invest in the business and new technologies.
Deliveroo’s self-employed drivers have seen a boom in demand during the pandemic, bringing food from otherwise-shuttered restaurants to house-bound customers.
But the Amazon-backed company has been running at a hefty loss; it said it narrowed an underlying loss to 223.7 million pounds ($308.93 million), from 317.3 million pounds in 2019.
Goldman Sachs and JP Morgan are leading the deal, while Bank of America, Citi, Jefferies and Numis are also part of the syndicate of banks managing the transaction.