Get set for “the biggest market debut in Britain for three years”, says Sky News. The online food-delivery platform Deliveroo is to float on the London Stock Exchange next month. The process could result in it being valued as much as £7.5bn.
In an offer branded “great food with a side of shares”, £50m of the shares in the “blockbuster” initial public offering (IPO) have been reserved for customers, who will be able to apply for up to £1,000 of them. However, priority will be given to long-standing users if the flotation is oversubscribed.
Deliveroo deserves “top marks” for inviting customers to buy a few shares in the company’s flotation, especially since “few firms bother to include retail investors in their IPOs these days”, says Nils Pratley in The Guardian. Not only is it a “fairer way to proceed”, but it will also help them “secure a crew of like-minded investors”. However, those investors may need to be very patient, since even a £5bn valuation, let alone the higher figures that some experts are talking about, relies on investors believing that the company, which is still loss-making overall, has “decades of growth ahead”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A lockdown boost
There’s no doubt that the lockdown has been good for business, as “new customers and higher order frequency” have lifted revenue by 54% to £1.2bn last year, says Karen Kwok on Breakingviews. If you value it on a similar price-to-sales multiple as rivals Just Eat or Takeaway.com, the company could be “worth $10bn including debt”. Still, Deliveroo “may need to add extra sauce to win over new shareholders”. There are growing concerns that sales could subside as customers “flock back to restaurants”, especially in the UK and Ireland, which account for around half Deliveroo’s revenue.
Already shares in American food delivery firm DoorDash have started to slide back after a “blistering debut” due to fears about what will happen after a “return to restaurants”, says James Titcomb in The Daily Telegraph. What’s more, even if sales continue to grow, there is no guarantee that costs won’t grow even faster.
While Deliveroo makes around 88p in gross profit (earnings minus the cost of making deliveries, such as drivers’ fees) from each £10 order, changes to employment rules around the “gig economy” may wipe this out. The freelance status of delivery workers is “being challenged in several countries”, with the UK Supreme Court recently ruling against Uber.
Still, even if Deliveroo is overvalued, you can’t blame its owners for cashing in while investors are still “hungry” for growth stories, says Patrick Hosking in The Times. Already, conditions are becoming “less benign for high-growth shares” as long-term interest rates start to rise. As a result, the share prices of growth firms have started to tumble, with Tesla down by nearly a third since January. Given the roster of “fast-growing disruptors” queueing to list in London, tech firms that delay flotation could be left out in the “undignified scramble” for investor’s money.
-
What is the average salary by age – and how do you compare?Are you making more than your peers? We look at the average salary by age to see how much the typical Brit earns at different stages of their life
-
Tesco braces for supermarket price war with rival AsdaTesco, Britain’s biggest grocer, has opted to cut its prices more quickly to prevent Asda grabbing market share
-
BP's 'long, painful decline' – and why next year could be even tougherOpinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global marketsOpinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Bargain Britain boasts both value and momentumInterview Ian Lance, manager of the Temple Bar Investment Trust, tells Andrew Van Sickle that the outlook for UK stocks has improved and healthy long-term returns are in prospect
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
-
Best of British bargains: cash in on undervalued companies in the UK stock marketOpinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
-
Building firm Keller presents low debt and ample scope for growthGeotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
-
PZ Cussons share price down 75% in last decade – why it's one to watchOpinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
