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On 22 March 2021, online food company Deliveroo announced that the price range of its IPO has been set at £3.90 to £4.60 per share, estimating its value at between £7.6bn and £8.8bn on admission. The company looks set to be one of the success stories of the COVID-19 pandemic, which has seen a huge increase in food delivery services and television streaming services while the hospitality sector has been shut down. The optimistic valuation is at the higher end of what had been predicted, suggesting significant investor support for the listing, initially valued at £7.5bn. Should it go ahead, it would be the largest listing on the London markets by market capitalisation since Allied Irish Banks was admitted to the Main Market of the London Stock Exchange with a valuation of £11.3bn in 2017.
The transaction follows a spate of large IPOs, including a £5.4bn listing by luxury retailer The Hut Group and JSC Kaspi’s £6.2bn IPO in 2020. A company of this size would usually qualify for inclusion in the FTSE 100. However, Deliveroo has adopted a dual-class share structure allowing its founder to retain greater control, which was the same route taken by The Hut Group. See also Deliveroo plans dual-class share structure IPO. This share structure requires the company to opt for a listing on the standard segment of the Main Market, meaning it is not eligible for inclusion on the FTSE indices. Nevertheless, it is likely that recent proposed reforms to the UK Listing Rules allowing company founders to retain more control once going public may have influenced Deliveroo’s decision to list in London, and the transaction will be well-received by a post-Brexit London that finds itself battling to secure its position as the financial capital of Europe.
Deliveroo’s IPO is set to raise gross proceeds of around £1bn for the company, with certain existing shareholders also selling shares. The offer is being made to institutional investors and will also include a community offer enabling UK-based customers who have placed at least one order with Deliveroo to apply for shares. Retail offers are still relatively uncommon in IPOs, despite media commentary pushing for increased retail investor participation in IPOs alongside institutions, and an offer to a defined set of customers is even more unusual. A customer offer was notably featured in Aston Martin’s IPO in 2018, where the company offered shares to eligible customers who owned an Aston Martin car. More recently, Parsley Box, a ready meal delivery service specialising in the over-60s market, also announced plans to conduct a customer placing in connection with its proposed IPO on AIM, expected to be admitted to trading next month.
Market Tracker will continue to monitor this transaction as it develops. Our upcoming ECM trend report will also look at IPO activity in more detail, including recent legal and regulatory developments anticipated to have an impact on this area in 2021 and beyond.
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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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