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”.
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.
-
The new 4% rule – how much should retirees really draw from their pension in 2026?Brits retiring in 2026 could be withdrawing too much from their pension pots if they stick to an old rule about ‘safe’ limits – with the risk of running out of money in retirement
-
Leaving it too late to gift inheritances costs some of Britain’s wealthiest families £3m eachEven average Brits are being landed with huge and unexpected inheritance tax bills because of a little understood rule around gifting, new figures show
-
Big Short investor Michael Burry closes hedge fund Scion CapitalProfile Michael Burry rightly bet against the US mortgage market before the 2008 crisis. Now he is worried about the AI boom
-
The global defence boom has moved beyond Europe – here’s how to profitOpinion Tom Bailey, head of research for the Future of Defence Indo-Pac ex-China UCITS ETF, picks three defence stocks where he'd put his money
-
Profit from a return to the office with WorkspaceWorkspace is an unloved play on the real estate investment trust sector as demand for flexible office space rises
-
New frontiers: the future of cybersecurity and how to investMatthew Partridge reviews the key trends in the cybersecurity sector and how to profit
-
An “existential crisis” for investment trusts? We’ve heard it all before in the 70sOpinion Those fearing for the future of investment trusts should remember what happened 50 years ago, says Max King
-
8 of the best properties for sale with wildlife pondsThe best properties for sale with wildlife ponds – from a 16th-century house in the Ashdown Forest, to a property on Pembrokeshire’s Preseli Hills
-
Why a copper crunch is loomingMiners are not investing in new copper supply despite rising demand from electrification of the economy, says Cris Sholto Heaton
-
Where to look for Christmas gifts for collectors“Buy now” marketplaces are rich hunting grounds when it comes to buying Christmas gifts for collectors, says Chris Carter
