Deliveroo shares have slumped as much as 30% as the takeaway delivery company made its highly-anticipated stock market debut in London on Wednesday.
The flop shaved more than £2bn off the delivery firm’s initial £7.6 billion valuation and just over a week after it was estimated to be up to £8.8 billion.
Just as Deliveroo is touted as the next British tech success story, the Amazon-backed company has failed to deliver on its first day of trading at the London Stock Exchange.
Shares plunged sharply as markets opened on Wednesday, with investors questioning Deliveroo’s ability to generate profits and an eye-popping £7.6 billion valuation.
Bloomberg reports that in contrast to the 86% surges that U.S. peer DoorDash Inc. posted in New York just a few months earlier and Airbnb Inc., another gig economy standout that had more than doubled on its first day of trading in December, Deliveroo’s performance was lackluster.
By market value, the delivery firm’s IPO is London’s biggest since Glencore went public nearly a decade ago.
Days before its stock market debut, Deliveroo is facing scrutiny over the way it treats its food-delivery drivers with hundreds of their drivers protesting on IPO day.
Deliveroo was also forced to revise down its upper valuation target by about 950 million pounds ($1.3 billion) just days before trading and ended up pricing its IPO at 390 pence a share. The stock was down 27% at about 286 pence as of 2 p.m. in London on Wednesday.
Despite the perceived strength of food delivery and consumer-facing tech platforms during the Covid-19 pandemic, this is not a guarantee of market success for the firm.
Deliveroo’s stock got a cold reception from investors as the company was plagued by worries over the risks to its business model if regulators crackdown on the gig economy.
Deliveroo sold shares at a low £3.90or at the bottom of its initial range. But a few hours after trading started, the share price fell to around £2.73 and many investors are now asking questions if the decline in stock value continues.
The Deliveroo listing at the London Stock Exchange was led by investment banks JPMorgan and Goldman Sachs, with Bank of America Merrill Lynch, Citi, Jefferies and Numis as partners.
The eight-year-old company also used “dual-class” innovation which has been introduced to the London Stock Exchange by the UK government in a bid to keep UK companies from being lured over to the NASDAQ or NYSE, as well as attract continental European listings for market success.
Deliveroo currently operates in 12 markets and has earlier committed to making the UK its main trading home with the city of London as its headquarters providing 47,000 jobs since launching in 2013.
CEO Will Shu founded the company in 2013 and was its first rider when it began operating in Chelsea, West London.
“At Deliveroo we want to be the definitive food company, bringing consumers the best choice of foods, giving restaurants new opportunities to grow their businesses, and providing riders with great work. We are always focused on developing the best proposition for consumers, restaurants and riders and look forward to bringing our service to new parts of the UK as we continue to grow,” Shu said in an earlier statement.