Deliveroo targets £8.8bn valuation to become biggest London debut in a decade

Deliveroo boss Will Shu

Credit:  Aurelien Morissard

Deliveroo is hoping to land a valuation of as much as £8.8bn when it floats on the London Stock Exchange, in what would be the biggest listing for the city for a decade.

The takeaway app said it would be selling 384m shares at between 390p to 460p each, giving it a market cap of between £7.6bn and £8.8bn when it joins the market.

It marks a significant step up from its last private funding round, which completed in January and saw it receive a price tag of £5bn.

Deliveroo has benefitted from a surge in demand during the pandemic, although has yet to record a profit, as more Britons have turned to takeaways whilst unable to eat out. When announcing the pricing of the float on Monday, Deliveroo said people had spent more than double on its app this year compared to last.

It said in the UK, the total value of transactions processed on its app was up 130pc in January and February compared to last year. In its other markets, which include Italy, Singapore and Australia, the rise was less pronounced, at 112pc. 

Boss Will Shu, who owns a little over 6pc of Deliveroo and whose stake could be worth almost £550m, said going public would allow the company "to continue to invest in innovation, developing new tech tools to support restaurants and grocers".

The company is aiming to raise up to £1bn in the float. It would come as the biggest debut on the London Stock Exchange since Glencore in 2011, and would be a major boon for the city which for years has lagged New York for attracting tech listings.

Figures out on Monday from advisory firm BDO suggested that less than 4pc of Britain’s fastest growing tech firms had chosen the LSE for their float in the past 20 years. 

The UK has been ramping up efforts to attract more innovative companies, though, and recently concluded a review into what could make London a better listing destination.

The review recommended that the LSE allows dual class share listings among its premium segment, in a move which would hand founders more control over their companies even if they only had a minority stake in their business. Deliveroo is expecting to use a dual class structure. 

Moral money takeaway

Mr Shu said he was "proud to be listing in London, the city where Deliveroo started".

Whilst the company has been bolstered by the pandemic, there have been some signs that new challenges could be coming down the line for Deliveroo, amid a shake-up of the gig economy in Britain. 

Earlier this month, Uber said it was moving to start giving all its 70,000 UK drivers pensions and holiday pay, following a ruling by the Supreme Court which demanded they be treated as workers.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown,  said Deliveroo "has so far seen off challenges in the courts to its self-employment model… but the winds of change are blowing through the sector following Uber’s decision last week to reclassify its UK drivers as workers, although it won’t apply to its Uber Eats model, for now at least".

"It’s clear the challenge to Deliveroo’s contractor model is likely to continue, and the European Commission is set to draw up new legislation governing how the gig economy model works across the bloc.

"If it is forced to change the way it classifies its riders in the future, it is likely to puncture its profits prospects, and could even derail the delivery giant."