Deliveroo’s dreadful first year ranks among worst IPOs in London

Food-delivery company has failed to impress and is now languishing 70% below its IPO price

Deliveroo was supposed to be a flagship tech listing for London, but, instead, it was the first in a string of flops.

One year on from its disastrous debut, Deliveroo Plc’s sustained slide has put it among the UK’s worst major initial public offering flops on record.

The food-delivery company has steadily failed to impress and is now languishing 70% below its IPO price, making it the worst first year of trading for a big London listing since sports car maker Aston Martin Lagonda Global Holdings in 2018.

“Deliveroo’s IPO suffered from a case of seriously bad timing,” said Victoria Scholar, head of investment at Interactive Investor. 

It aimed for a sky-high valuation that didn’t match 2021 levels of much more subdued demand when restaurants and bars reopened.”

Regulatory hurdles, spiralling costs and increased competition have plagued the food-delivery sector, while profitability remains elusive, leading investors to rapidly lose patience. 

Outlook grim

The outlook for Deliveroo and its peers is grim, with countries emerging from lockdowns and other Covid restrictions and as growth stocks fall out of favour in the face of rising interest rates.

“Lots of perceived long-term growth stocks have been absolutely hammered,” said Russ Mould, investment director at AJ Bell. “There are company-specific factors at work for Deliveroo, notably rising wage costs, fierce competition, increased investment delaying a move into the black.”

Deliveroo was supposed to be a flagship tech listing for London, but instead, it was the first in a string of flops. 

Semiconductor company Alphawave IP Group, gene-sequencing startup Oxford Nanopore Technologies and alternative asset managers Petershill Partners and Bridgepoint Group have all sunk below their IPO prices.

The poor showing of recent listings and the lure of deeper investor pockets and higher valuations has prompted some of the UK's most promising tech companies to take their IPOs to New York instead. SoftBank Group-backed Arm Ltd and money-transfer business Zepz are said to eye Nasdaq listings.

Strong rally

To be sure, Deliveroo enjoyed a strong rally last summer, briefly boosting the shares above the IPO price and signalling there is potential for recovery. The company’s latest results earlier this month were well-received, with analysts pleased by Deliveroo’s target for profitability in the medium term.

Analysts covering the stock remain bullish, with no sell recommendations on the stock among the brokerages tracked by Bloomberg, and an average 12-month price target at about twice the current share price.

“Over the last 12 months, we have made good progress in executing our strategy,” said Deliveroo spokeswoman Emma Hutchinson. 

“We have also laid out our plans on our longer-term path to profitability, which is the key focus for Deliveroo this year and beyond.”

• Bloomberg