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On 4 March 2020, Deliveroo announced plans to undertake its highly-anticipated initial public offering (IPO) by listing on the London Stock Exchange (LSE). Operating in twelve markets across the world, the transaction is set to be the largest IPO of the year with a predicted market capitalisation of £7.5 billon should it go ahead. The announcement illustrates the success of the British company, which has supported 46,700 jobs in the UK. Given that 2020 was a ‘year of growth for Deliveroo’ and ‘significant growth potential in the online food delivery sector’, the company has identified a great opportunity to go public.
The tech giant is planning a dual-class share structure. Under this structure, Deliveroo will not be eligible for a premium listing, discounting it from the major FTSE indices, but has announced that it will move to a single structure after three years which will provide for this opportunity. It may be that recent proposals to relax the UK listing rules have confirmed the company’s decision to list on the London markets. The announcement coincides with recommendations made by former EU financial services commissioner, Lord Jonathan Hill, in an Independent Review commissioned by Chancellor Rishi Sunak. The Review recommends modernising the UK Listing Rules to allow companies with a dual-class share structure, which provides founders a greater say in shareholder votes, to pursue a premium listing and therefore qualify for inclusion on the FTSE index.
Deliveroo is not the first company to list with a dual-class structure in order to maintain the founders’ position. In September 2020, the Hut group opted for a standard listing to allow for a dual-class structure in a £1.9 billion float. Although this structure has historically been a popular option in the US and previously frowned upon by UK investors, factors such as the COVID-19 pandemic and Brexit have increased the need for reforms to make the UK a more attractive investment hub, despite concerns around weakening investor protection. Other key points addressed in the Review include a reduction of the required free float from 25% to 15%, allowing companies to use other measures to demonstrate liquidity, and ‘rebranding and repositioning the LSE’s standard listing segment to increase its appeal to companies of all sizes and types’.
The announcement of the company’s IPO comes as a welcome boost to the market. Sunak was quick to acknowledge this stating: ‘So it's fantastic that Deliveroo has taken this decision to list on the London Stock Exchange. Deliveroo has created thousands of jobs and is a true British tech success story. It is great news that the next stage of their growth will be on the public markets in the UK’.
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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