By Natalie Hughes
With the abundance of home lockdowns and quarantines throughout the past year, revenues of at-home delivery services have skyrocketed to unprecedented levels. This information bodes very well for companies like Deliveroo, a U.K.-based, Amazon-backed food delivery service. As a result of the firm’s recent success, the Deliveroo executive team has made the decision to go public in hopes of raising capital and expanding its business. The company is projected to raise a whopping £1 billion (the equivalent of $1.38 billion) in said Initial Public Offering next month when it begins to trade on the London Stock Market. However, as vaccines continue to roll out and more citizens begin to brave outdoor and indoor dining experiences, it’s unclear how sustainable the growth of delivery services will be.
With an upward valuation as high as $12 billion, Deliveroo’s recent success is likely to entice investors. The company plans to offer up 256,456,256 new shares at a price between £3.90 to £4.60 per share, valuing the company at around $8 billion. Even if share prices fall at the lower end of the range, Deliveroo will still be the largest tech IPO in Europe this year and the largest in Britain within the last decade.
While the rest of the world will undoubtedly enjoy watching Deliveroo’s stock issuance unfold, those truly benefitting from the firm’s IPO are its top shareholders and CEO. While some shareholders will offload their ownership in the deal, sources say that the majority are planning to keep hold of their shares and, in turn, walk away with hundreds of millions in their pockets. However, the biggest winner overall is Deliveroo CEO Will Shu. Shu owns 6.1% of the company’s capital totaling over 90 million shares. After the deal is concluded his ownership will increase to over 115 million shares, possessing over 50% of the voting rights. In accordance with the firm’s projected share price, Shu’s stake in Deliveroo will be worth about £500 million.
While many parties stand to benefit from the impending IPO, one cannot leave out Amazon’s participation as a stakeholder in the company. After investing $600 million in Deliveroo back in May of 2019, the tech giant is prepared to hold an 11.5% stake in Deliveroo post IPO. While it currently owns a 15% slice, it is rumored that Amazon will be selling about 23 million shares, thus profiting about £100 million. Deliveroo executives have stated that they plan to use the money from Amazon’s sale to expand into new markets and grow its network of “delivery-only kitchens”.
Despite the projected decline of delivery services in the coming months, stakeholders of Deliveroo remain confident that there is still room to grow. The firm warned those stakeholders in its IPO documents that 2020 revenues may not continue in the future, yet Deliveroo’s sizeable valuation and the attention drawn to the deal suggest otherwise. Perhaps only time will tell as the firm’s IPO will pose as a test for continued investor interest in the delivery-service sector.