By Lina Saigol
Amazon-backed food delivery company Deliveroo kicked off its eagerly-anticipated initial public offering in London on Monday, helping to boost government hopes of convincing more fast-growing technology companies to list on the London Stock Exchange /zigman2/quotes/206625606/delayed UK:LSEG +1.19% .
London-based Deliveroo, which is 16% owned by online retailer Amazon /zigman2/quotes/210331248/composite AMZN +2.21% , plans to raise capital by selling new stock, while existing holders also will sell shares, according to a statement that didn’t provide details on the size of the planned offering. The company was valued at more than $7 billion in its latest funding round that completed in January.
The filing includes details of a dual-class share structure that would give co-founder and Chief Executive Will Shu 20 votes a share, while all other shareholders will have a single vote for each share. The structure, which is more common in the U.S. where it is used by companies including tech giants Google parent Alphabet /zigman2/quotes/202490156/composite GOOGL +0.90% and Facebook /zigman2/quotes/205064656/composite FB -0.18% , will expire three years after the IPO.
As a result, the stock is ineligible for the LSE’s premium segment and can’t be included in benchmark indexes such as the FTSE 100, despite the expected size of the offering. Shares are expected to start trading in the next few weeks.
Deliveroo’s planned offering comes just days after a government-backed report made a series of sweeping recommendations aimed at overhauling U.K. listing rules and attracting more tech companies to London to ensure the City doesn’t fall behind key European financial centers like Amsterdam post Brexit.
London accounted for only 5% of global IPOs between 2015 and 2020, according to the review, which was carried out by the former European Union commissioner for financial services, Lord Jonathan Hill.
The city’s attractiveness has diminished in recent years, as the U.S. and Hong Kong have captured the majority of demand for tech IPOs. New York’s markets have been buoyed by a surge of special-purpose acquisition companies (SPACs), which raise equity via IPOs and then hunt for private companies to buy or merge with, before taking them public.
These blank-check companies have two years to strike a deal or they have to return the cash, which is held in trust, to their investors. However, under current U.K. rules investors are locked in as soon as a SPAC goes public, deterring many from participating in blank-check companies.
Hill’s review recommends that the U.K.’s financial regulator, the Financial Conduct Authority, consults on lifting the suspension requirement. That would bring London more in line with New York.
The U.K. market is on track for a record first quarter in terms of proceeds raised from IPOs, after a series of companies, including cult boot maker Dr. Martens /zigman2/quotes/224328095/delayed UK:DOCS +0.39% and online greeting-cards retailer Moonpig /zigman2/quotes/224387775/delayed UK:MOON +1.14% , made their market debut on the LSE in recent weeks. On Friday, Russia’s biggest dollar-store retailer, Fix Price Group, started trading on the LSE after raising $1.7 billion in an IPO.
‘’Deliveroo’s intention to launch onto the London market is the latest in a steady stream of IPOs in the first two months of 2021, but with its unicorn status, it’s likely to be the biggest coup in terms of size. It’s currently valued around £5 billion after it raised £129 million in investment in January, but is expected to float with a valuation closer to £7 billion,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. A unicorn is a privately held startup company valued at over $1 billion.
Trustpilot joined the growing list of London IPOs on Monday, after the Denmark-based online review platform said it has received commitments from several funds to act as cornerstone investors in its coming offering at a price that values the company at up to $1.4 billion.
Companies like Deliveroo, Trustpilot and Moonpig have all benefited from surging demand for their services during the COVID-19 pandemic.
In a trading update alongside its IPO circular, Deliveroo said it had grown the total number of transactions processed on its online platform — the so-called gross transaction value (GTV) — by 64.3% in 2020 to £4.1 billion, up from £2.5 billion pounds in 2019. The company narrowed its underlying loss over the previous year by 29% to £233.7 million in 2020.
As part of its flotation, Deliveroo also said that riders in its 12 markets — who have worked with the company for at least a year — will be paid a bonus of either £10,000, £1,000, £500 or £200 depending on the number of orders they have delivered.
It is also reserving £50 million worth of shares for private investors who are also customers of its services. “Far too often normal people are locked out of IPOs, and the only participants are the institutional investors. I wanted to give as many customers as possible the chance to become shareholders,” said Shu.
“We are pleased to see this offer is not being restricted to institutional investors, unlike many other highly sought after IPOs of recent months. Although it is a little disappointing a wider range of retail investors will not be able to get involved initially, the company clearly wants to give its customers the first chance of owning a slice of the company, in recognition of their support,” Streeter noted.