Ocado is under pressure from shareholders to consider a move from London to New York, threatening another major blow to the beleaguered UK stock market.
It is clear that in recent weeks there have been personal conversations with investors in which the idea of moving the listing to America was discussed in detail.
At a private dinner around the time annual results were released last month, at least one leading fund manager told executives he wanted the prospect of a transatlantic shift to be scrutinized.
Rumors of Ocado's potential exit have been fueled by a collapse in its share price from record highs during the pandemic. Ocado shares have fallen almost 90% from a peak of over £28 during lockdown to under £3.50 today.
At some stage the company was worth more than Sainsbury's, Marks & Spencer and Morrison's customers stuck at home rushed to place online orders. Its market capitalization now stands at less than £3 billion, having peaked at £22 billion in September 2020.
City sources believe Ocado founder and CEO Tim Steiner could be persuaded to consider a move to the States amid lingering frustrations over the reluctance of some investors to recognize it as a bona fide technology company rather than a struggling, persistently loss-making online grocer.
The exodus of British blue chips to the States has been fueled by the belief among many CEOs that their companies will command much higher valuations. The spate of exits is fueling fears that the London stock market – once the world's top index – is in danger of becoming a backwater for shares.
British chipmaker Arm's decision to abandon its homeland for America last year, partly in search of a more generous valuation, is believed to have focused minds among some Ocado shareholders. The move sparked controversy as it was seen as a major snub to the Prime Minister, who had made a direct appeal to Arm's Japanese owners to relist the company in London.
However, Softbank's decision appeared to be quickly vindicated after its share price soared in the months following its September debut on the Nasdaq. By February, the semiconductor maker's share price had nearly tripled from $51 to $149. It traded at $95 on Friday after a major sell-off following disappointing financials earlier in the week.
The decision by owner Paddy Power Flutter, plumbing giant Ferguson, cement maker CRH, tour operator Tui and several other big names to turn their backs on the capital in one form or another has fueled fears that London is locked in a death spiral. Shell's threat to join the wave of departures sent shockwaves through the city earlier this month.
Research has shown that there is a huge gap between US and UK assessments. One recent analysis found that the value of Britain's 100 largest companies would increase by almost £500 billion if they fled to New York. Over the last seven years, the average company going public in the US was valued at 25 times earnings over a three-year period, compared with just 15 times earnings in the UK, according to research by asset manager SCM Direct.
Retailers say the stumbling block to Ocado's wave of refusals is its delivery partnership with Marks & Spencer. However, the joint venture turned aggressive after Ocado accused its partner of failing to meet a final lump sum payment linked to performance. Ocado has threatened to sue Marks & Spencer regarding the outstanding amount. Signs & Spencer said he was advised that performance pay criteria had not been met.
Some believe that Marks & Spencer will seek to buy out Ocado as part of the agreement, leaving Ocado to focus on its technology division, which sells warehouse robots to some of the world's biggest retailers around the world.
His clients include American grocery giant Kroger. Britten Ladd, a consultant who advised Kroger on the Ocado deal, told The Telegraph last month that Ocado should consider ending its exclusivity agreement with Kroger to grow more aggressively in the US. However, Ocado insiders have ruled out such a move.
The company declined to comment.
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