Deliveroo’s blockbuster share offering faces a rough ride after institutional investors baulk at £7.5bn valuation
Deliveroo’s blockbuster share offering faces a rough ride after institutional investors baulked at the firm’s £7.5billion valuation.
Two fund managers who run multi-billion pound portfolios told The Mail on Sunday they wouldn’t buy any shares at the price offered by the company’s brokers. One said the float was ‘ludicrously priced’.
Another big investor said: ‘They want a high price but the firm didn’t make any money last year.’
Ludicrous: Two fund managers who run multi-billion pound portfolios said they wouldn’t buy any shares at the price offered by the company’s brokers
Last year, Deliveroo reported a £223.7million loss. But turnover grew to £4.1billion in 2020 from £2.5billion in 2019.
Both fund managers suggested the flotation, which will initially raise £1billion of new funds, might not succeed unless the value was cut to encourage investors back to the deal. The valuation is indicative and a final price has yet to be set.
Deliveroo was set up in 2013 by ex-Morgan Stanley banker Will Shu and a friend, Greg Orlowski. Shu came up with the idea after he struggled to find decent food delivery options while working long hours at the investment bank.
High-profile investors in the business include Amazon, which led a $575million (£415million) funding round in exchange for a 16 per cent stake in 2019.
The firm now lists 45,000 UK restaurants. Other floats are seeing strong appetite from investors.
City sources said brokers to Trust Pilot are said to be pricing the Danish consumer review website at the top of its range.
Deliveroo and Trust Pilot follow on from a wave of other listings. In January, boot maker Dr Martens floated in London with a valuation of around £3.5billion. Moonpig, the online card retailer, launched a £1.2billion listing shortly after.
In the US, there has also been a rush of stock market floats. Dating app Bumble floated there in February with a valuation of $8.2billion.
Companies have been tempted to sell shares as stock markets flirt with all-time highs following huge liquidity injections by governments and central banks in the last year.
However, some investors, wary that several recent London floats have done badly, are very sceptical about the wave of new issues.
Aston Martin floated in London in 2018 at £19 a share and saw its shares plunge 98 per cent over the following two years. Eventually, Lawrence Stroll, the tycoon behind the Tommy Hilfiger brand, led a £536million rescue.
Some of the banks involved in the flotation of Aston Martin, such as Goldman Sachs, are leading the listing of Deliveroo.