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Banking industry

Deliveroo's Disastrous Debut: Losses Add Up as Shares Plummet

Strategic Insights

— 1 min read

Shares in the food delivery firm Deliveroo suffered a severe decline on its first day of trading, plummeting from a starting price of 390p to as low as 271p, resulting in a market value loss of £2.3 billion. The firm, which listed at £7.6 billion, was valued at up to £8.8 billion by advisers Goldman Sachs and JP Morgan. Critics have accused the advisers of "mispricing" the shares, while others have pointed to concerns over workers' rights and governance issues as contributing factors to the poor performance.

Key Takeaways:

  • Deliveroo's shares dropped by 26% on their first day of trading, closing at 287.45p.
  • The firm's market value plummeted by £2.3 billion, making it one of the worst London debuts on record.
  • Advisers Goldman Sachs and JP Morgan were accused of "mispricing" the shares, with some arguing that the firm's loss-making business model and competitive environment made the valuation too high.
  • The poor performance was also attributed to concerns over workers' rights, as the company classified its delivery riders as "self-employed" and denied them rights such as minimum wage and holiday pay.
  • Institutional investors such as Legal & General, Aviva, and Jupiter boycotted the listing due to governance issues and the company's treatment of riders.
  • Deliveroo was valued at up to £8.8 billion by Goldman Sachs and JP Morgan, but listed at £7.6 billion, raising questions over the accuracy of the valuation.
  • The float has been described as "an absolute car crash" by one banker, and "a flat on its face" by Russ Mould, investment director at AJ Bell.
  • Neil Wilson, chief analyst at Markets.com, stated that Deliveroo was "demanding too high a price tag for a loss-making delivery platform" in a competitive environment.

Statistics:

  • Deliveroo's shares dropped by 26%, closing at 287.45p.
  • The firm's market value plummeted by £2.3 billion.
  • Deliveroo was valued at up to £8.8 billion by Goldman Sachs and JP Morgan, but listed at £7.6 billion.
  • 26% of investors in the float are institutional investors such as Legal & General, Aviva, and Jupiter.

Sources:

  • RedFox News
  • Markets.com
  • AJ Bell
  • Goldman Sachs
  • JP Morgan
  • Deliveroo's IPO documents
  • Financial Times

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