Deliveroo eyes market value of up to £8.8bn in biggest London flotation for a decade

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Deliveroo has revealed that its looming flotation will value the company at between £7.6bn and £8.8bn – placing it on course to be the biggest market debut in London for a decade.

The food delivery app said on Monday that it had set a price range for its Initial Public Offering (IPO) of between £3.90 and £4.60 per share.

The range reflects the prospect of a big appetite for shares in the company, which has benefited from high demand for takeaway meals during the COVID-19 pandemic as dine-in restaurants were forced to close.

In a short trading update that accompanied the pricing plan, Deliveroo said the total value of orders it received was up by 121% in January and February this year compared with the same period in 2020.

Will Shu will initially have 20 votes per share compared to one vote per share for other stakeholders. Pic: Deliveroo
Image: Will Shu is set to land his biggest payday from Deliveroo when the flotation takes place. Pic: Deliveroo

Sky News revealed last night that chief executive Will Shu, who launched the company less than a decade ago, was likely to sell a small part of his 6.2% holding in the flotation.

An insider suggested it would give him his largest payday, worth millions of pounds, to date.

Deliveroo said the planned listing would consist of mainly new shares – aimed at raising up to £1bn to invest in the expansion of the business – and the sale of some shares by existing shareholders.

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The company did not disclose a date for the listing.

London Stock Exchange data showed it would be the biggest debut since Glencore’s £40bn bow in May 2011 – overtaking Worldpay’s IPO in 2015.

It intends to operate a dual-class share structure for three years that will allow Mr Shu to retain control of the company under a proposed shake-up of City rules that has been backed by the government.

Deliveroo customers will be able to participate through a “community offer” while its 100,000 riders are set to be rewarded with cash payouts of up to £10,000 with the sum dependent on level of service.

Deliveroo has around 45,000 restaurants on its platform in the UK but continues to face questions about the terms on which its riders work for it and the funding model it uses with restaurant partners.

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October 2020: Deliveroo accused of unfair commission rates

Mr Shu said: “We are proud to be listing in London, the city where Deliveroo started.

“Becoming a public company will enable us to continue to invest in innovation, developing new tech tools to support restaurants and grocers, providing riders with more work and extending choice for consumers, bringing them the food they love from more restaurants than ever before.

“This will help us in our mission to become the definitive food company.

“We have seen a strong start to 2021 and we are only at the start of an exciting journey in a large, fast-growing online food delivery market, with a huge opportunity ahead.”

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said of the price range: “This is towards the upper end of expectations given that in January an investment round, which saw the company gain a £129m investment, put a value on the company of around £5bn.”

She added that Deliveroo was under pressure to maintain growth post-pandemic in a fiercely competitive market.

“Deliveroo competes with Uber Eats, Just Eat and a host of others.

“Just Eat has already announced its intention to ramp up operations in the UK. Until now it’s been focused on just offering the delivery platform but now it will be scaling up its delivery fleet of riders over the coming year.

“Just Eat takeaway has also pledged to stop using the gig economy model and offer UK workers hourly wages, sick pay and pension contributions.

“This is in stark contrast to Deliveroo which has so far seen off challenges in the courts to its self-employment model”, she said.

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