Deliveroo IPO gathers momentum

Founder and chief executive Will Shu prepares to float the company on the London Stock Exchange in an IPO expected to raise £1 billion

Deliveroo founder Will Shu said it will float the company on the London Stock Exchange and is gearing up for a £1 billion initial public offering (IPO) that could value the company at £5 billion. The food delivery giant has yet to announce the float date, but it’s expected to be in early April.

Shu started the company in London in 2013 and has become a leading player in the food delivery space with a global footprint. It operates in nearly 800 towns and cities across 12 markets, including Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, United Arab Emirates, Kuwait and the UK.

Deliveroo announced its go-public plans two months after it raised $180 million in a funding round that valued the company at $6.8 billion. The investment came from Durable Capital Partners and existing investor Fidelity.

The company has raised $1.7 billion over 11 rounds that attracted 28 investors, including Jeff Bezos’s Amazon.

The idea of floating the company has been around since 2017.

Financials

Deliveroo is reportedly serving more than six million customers in the UK alone. It works with 140,000 restaurants and over 110,000 riders globally. But despite the traction it has in the market, the company is yet to make a profit.

Deliveroo recorded losses of £232 million in its financial year 2018, up from £199 million the previous period. Losses climbed in 2019 to £319.9 million, partly due to expansion costs and capital spent on rolling out to 200 more towns and cities.

The rise in demand prompted by the Covid-19 lockdowns led to better financials. Deliveroo recorded a gross transaction value of £4.1 billion last year, up 64.3% from £2.5 billion recorded in 2019. However, the business remains loss-making. The underlying loss for 2020 is £223.7 million, 30% down from £317.3 million in 2019.

Deliveroo IPO: The details

A date for the IPO is yet to be set. Deliveroo decided to use a dual listing structure on the London Stock Exchange and is planning to raise £1 billion.

Deliveroo originally sought a £5 billion IPO, but it amended its plan after the British government changed the rules regarding founders keeping control of their companies despite selling shares.

The IPO will sell Deliveroo shares Class A, comprising a mix of new and existing shares in the company. While institutional investors outside of the US are the primary target, private investors will be able to purchase Class A shares in Deliveroo.

Deliveroo also announced that £50 million shares will be available to existing customers on an invite-only basis. Non-Deliveroo customers can register their interest on the company website or the app, but active accounts will be prioritised.

Founder and chief executive Shu will acquire Deliveroo Class B shares. Shu will have 20 votes for every one vote made by a Class A shareholder.

The dual share structure will remain in place for three years when Class B shares will convert to Class A and available for sale.

Deliveroo’s IPO comes at a time when the food delivery market is at its highest and on the back of milestone investment activity in the sector.

US-based food delivery DoorDash reached a $60 billion market valuation at its December IPO in New York, raising $3.4 billion. In February, the company reported that revenue rose to $970 million in Q4 2020, up from $298 million the previous period.

Another leading player in the market is Just Eat Takeaway, the resulting company from the merger between Just Eat and Takeaway.com last year. Deliveroo’s closest European rival, Just Eat Takeaway is valued at £10.1 billion on the FTSE 100.