Food delivery giant Deliveroo is set to list its shares on the London Stock exchange, which could value the firm at more than $7.5bn (£5.5bn).
Deliveroo has long planned for this announcement, and rumours started circling last year that it would happen in Q1 2021.
The coronavirus pandemic has seen the company grow exponentially due to people being forced to stay home – and last year announced its first year of operating profit.
Will Shu, who founded Deliveroo in London eight years ago, said: “Deliveroo was born in London. This is where I founded the company and delivered our first order. London is a great place to live, work, do business, and eat. That’s why I’m so proud and excited about a potential listing here.”
Commenting on Deliveroo’s announcement, Chancellor Rishi Sunak said: “The UK is one of the best places in the world to start, grow and list a business – and we’re determined to build on this reputation now we’ve left the EU. That’s why we are looking at reforms to encourage even more high growth, dynamic businesses to list in the UK.”
The announcement follows new rules regarding tech companies creating IPOs. As a part of the new regulations, a new listing would create two different classes of shares with differential voting rights, giving founders more say in key decisions. The rules are now similar to its US and Hong Kong counterparts.
Professor John Colley, Associate Dean of Warwick Business School and an expert on tech firm IPOs, said: “This valuation of Deliveroo seems excessive for a business which is still many years from profit, especially given that some hold significant doubt whether the home takeaway delivery model can become profitable outside of London.
“Indeed, the sole basis for this valuation appears to be the immense amounts of cash looking for growth technology stocks. Bear in mind the recent Supreme Court finding that Uber drivers are ‘workers’ and have certain rights such as paid holidays and pensions. This finding may well apply to takeaway home delivery too, driving up their costs.
“Ultimately Deliveroo will have to charge customers and restaurants far more to make a profit, but that brings its own difficulties. For restaurants, margins are already narrow. And at what price do customers simply decide to collect their own meals?
“Potential investors should also remember that if this listing is under new stock market rules, it may well be accompanied by founder share rights. That means if the company is badly run there is little shareholders can do to change the board.”