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Wed 31st Mar 2021 - Deliveroo share price sees circa 20% recovery after company has £2.2bn wiped off valuation in initial trading
Deliveroo share price sees 20% recovery after company has £2.2bn wiped off valuation in initial trading: Deliveroo’s share price has sunk by circa 20% after initially dropping 30% on its opening day of trading on the stock market. The starting 390 pence price gave an overall valuation of £7.6bn for the company, less than initially expected, after a number of major UK fund managers said they would not take part, citing concerns about its dual class share structure and its gig economy business model. However, it lost £2.28bn of its value within minutes of the market opening, with the price falling to as much as 271p. Since then, the price has begun to recover and now stands at 309.75p. But, one senior equity capital markets banker said the initial drop in value would hurt the market for initial public offerings in the UK and Europe. He told Reuters: “Massive disconnect between the order book and the wider market.” Deliveroo’s self-employed drivers have seen a boom in demand during the covid-19 pandemic, bringing food from otherwise-shuttered restaurants to housebound customers. The listing of the London-based company, founded by boss William Shu in 2013, is London’s biggest initial public offering since Glencore’s in May 2011 and also the biggest tech float ever on the London Stock Exchange. However, a number of heavyweight investors including Aberdeen Standard Life, Aviva, Legal & General Investment Management and M&G opted out of the deal, citing concerns about gig-economy working conditions and the outsized voting rights that will be handed to Shu. The company said this week it had received "significant demand" from investors across the globe – more than enough to cover the offer of shares worth £1.5bn several times over. However its price range last week of £3.90 to £4.60p per share – which at the top of the range would have valued the company at £8.8bn – has been narrowed over recent days, with the business citing “volatile global market conditions”. The float priced Deliveroo at 390p – the bottom end of that range, and equivalent to a valuation of £7.6bn. Deliveroo, which has about 45,000 restaurants on its platform in the UK and more than 100,000 worldwide, has benefited over the past year from an increased appetite for takeaways with dining out banned or restricted. Recent trading figures showed the total value of orders it received over January and February was 121% higher than in the same period a year ago while for 2020 the total of £4.1bn was 64% higher than as a year earlier.

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