Deliveroo IPO could cause indigestion for investors

Is a firm that has failed to turn a profit – even during the lockdown takeaway boom – worth investing in?

Takeaway-delivery platform Deliveroo is set to be “the biggest London stockmarket debut since Glencore almost a decade ago”, say Mark Sweney and Sarah Butler in The Guardian. It has priced its initial public offering (IPO) “at between £3.90 and £4.60 a share”. This would value the company at up to £8.8bn, about £1bn more than initially expected. At the top end of the proposed price range, Deliveroo would be worth more than Premier Inn and Beefeater owner Whitbread (£6.6bn) and luxury goods group Burberry (£8.2bn).

Deliveroo’s “lofty target” isn’t bad for a company valued at only £5bn as recently as January, says Ben Marlow in The Daily Telegraph. But is a firm that has “wolfed down £1.3bn of private capital since 2013” without any sign of turning a profit – not even during the lockdown takeaway boom – worth investing in? In a few weeks’ time when pubs and restaurants are full and takeaway orders are falling, the shares “might not seem so appetising”.

Still, while prospective investors may get indigestion, those who previously invested in the company will do well, says Alistair Osborne in The Times. Of the £1.6bn the company will raise from the flotation, only £1bn will go to the firm itself. 

Founder Will Shu will keep most of his shares, but is planning to “wolf down £28m straight away” with a sale, while hanging on to his class-B shares will give him 58% of the voting rights, thus “bullet-proofing Deliveroo from takeover and [himself] from the sack”. 

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