UK – British food delivery firm Deliveroo has announced plans to go public with a possible listing in the London Stock Exchange before the end of April this year.
The hotly anticipated IPO is expected to value Deliveroo at more than US$7 billion, based on a private funding round it completed in January.
If successful, Deliveroo’s IPO will be one of the largest London listings in several years.
The company is planning to go live after recording a 64% surge in business during the COVID-19 pandemic.
It has already published a registration document and an expected “intention to float” -which signals the start of the listing process.
The listing comes even as the company largely remains unprofitable and continues to make losses.
In 2020, the food delivery company recorded an underlying loss of £223.7 million (US$309 million), a 29 percent drop from the £317 million (US$438 million) recorded in 2019.
At the height of the pandemic, restaurant closures nearly brought the company to its knees and only a £442 million cash injection from its main backer Amazon prevented it from failing financially and exiting the market.
UK’s Capaital Markets Authority had then said that the approval of the cash injection was made on the fact that its collapse would shrink the food delivery market, worth £8.5 billion in 2019, and thus make it less competitive.
Despite being loss making, Delivery is still a major player in the UK food delivery scene.
It now serves some 6 million customers, with its three-sided marketplace also including more than 115,000 restaurants, takeaways and grocery stores.
The company also provides direct employs to more than 100,000 riders in the 800 locations of its 12 markets.
Deliveroo has also showed some clear momentum in a year where many restaurants had to close their doors and shift operations to take-away models because of COVID-19.
It notes that it has been profitable on an “Adjusted EBITDA basis” over two quarters, with underlying gross profit up by 89.5% to £358 million (US$495 million) compared to £189 million in 2019.
Its gross transaction volume (total amount spent by consumers ordering food) grew by 64% to £4.1 billion ($5.67 billion) with the run-rate in Q4 surging to £5 billion.
Apart from being loss-making, the company has another headache to face: that of its delivery partners wanting better work conditions.
A recent landmark ruling by the UK Supreme court on Uber Workers’ Rights could have huge ramifications on the UK food delivery giant.
The Supreme Court upheld a ruling that forces Uber to classify its drivers as workers, not self-employed contractors.
This means that Deliveroo might find itself in the same predicament as Uber and be required to provide more benefits to workers, something that could shoot up its cost of doing business.
Going from on the verge of “exiting the market” to a US$7 billion float in twelve months is, however, an enviable reverse of fortunes.
It remains to be seen whether Deliveroo manages to successfully list in the LSE. Its delivery partners are among the most anxious given that a successful listing comes with a US$14,000 bonus to every one of them.
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