Deliveroo narrows price range ahead of market debut in London

Photographer: Simon Dawson/Bloomberg

Food delivery group Deliveroo has narrowed the price range on its initial public offering, ensuring its order books were fully covered for what will be London‘s biggest IPO in a decade.

The London-based company, founded by boss William Shu in 2013, could be valued at up to 7.85 billion pounds ($10.85 billion) in its stock market debut on March 31.

The listing is set to be London‘s biggest IPO since Glencore in May 2011 and also the biggest tech float on the London Stock Exchange, dwarfing The Hut Group last year.

Deliveroo narrowed its price range on Monday to between 3.90 and 4.10 pounds per share, indicating a valuation of between 7.6 billion pounds and 7.85 billion pounds, excluding shares offered as part of an over-allotment issue.

The company opted against pricing the deal at the top of an original price range of between 3.90 and 4.60 pounds – which would have given it a market value of up to 8.8 billion pounds – citing market volatility.

Banks working on the deal said on Monday that order books were covered throughout the price range, showing demand would “exceed the full deal size.”

Deliveroo has received very significant demand from institutions across the globe. The deal is covered multiple times throughout the range, led by three highly respected anchor investors,” a company spokesperson confirmed.

“Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”

A source familiar with the listing said the company had to take into account the performance of some recent IPO deals, such as U.S. cloud computing firm DigitalOcean and British online reviews platform Trustpilot, which were both trading below their IPO price.

“By narrowing its target range, Deliveroo is trying to make sure it doesn’t hit a bump in the road as it begins its journey on the stock market,” said Hargreaves Lansdown’s senior investment and markets analyst, Susannah Streeter.

Deliveroo has benefited from lockdown demand for takeaway food during the COVID-19 crisis when restaurants across Europe were forced to shut down.

Its revenues have soared and its so-called gross transaction value – a measure of the total value of orders received – jumped 64.3% in 2020 to 4.1 billion pounds.

‘MANAGING EXPECTATIONS’

Deliveroo‘s order book has so far attracted strong interest from U.S. investors which are familiar with the dual-class share structures and the dynamics of tech listings, the source close to the IPO said.

Yet, some British institutional investors are not comfortable with the company’s decision not to pursue a premium listing. This will allow its CEO Shu to retain enhanced shareholder rights but means the company will not join the FTSE indices.

UK fund manager Legal & General Investment Management said last week it was unlikely to participate in the IPO.

“It may be blaming volatile market conditions for the move, but the rejection of the IPO by a slew of institutional investors is likely to also have caused some concern at the delivery company,” Hargreaves Lansdown’s Streeter said.

“It’s likely initial orders for the IPO have come in nearer the bottom of the target range, and by setting its sights nearer those prices, it is managing expectations on its ride to listed status,” she added.

JPMorgan and Goldman Sachs are acting as joint global coordinators on the deal while Bank of America, Citigroup, Jefferies and Numis are the joint bookrunners.

Reuters

Singapore Reporter/s

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.