Deliveroo IPO Ends in Nose Dive

Amazon-backed Deliveroo delivered a disappointing performance on Wednesday, shortly after its highly-anticipated IPO debut on the London Stock Exchange. 

Shares in the British delivery start-up, which were originally priced at £3.90, sank 30% to a low of £2.71. Although later recovering slightly to £2.89, the stock’s fall wiped an estimated £2 billion off the company’s valuation.

Deliveroo’s IPO was one of the largest seen in the U.K. in years, although the company, like the other third party delivery apps to go public, has yet to turn a profit.

Founded by Connecticut native William Shu, the third-party delivery app made gains during the pandemic, when Brits increasingly relied on the start-up known for its superior restaurant options and swift delivery.

Deliveroo’s poor performance on Wednesday raised concerns over whether the pandemic boom in food delivery may be coming to an end as restaurants begin opening their doors again.

“Has the shoe fallen out of the IPO market for “Stay at Home” COVID stocks?” said PMH Capital’s Paul Hill in a tweet about the Deliveroo debacle. 

In February, U.S. peer Doordash’s stock fell as much as 40% after the company published its first earnings report since its initial public offering. 

Other investors cited concerns about the gig economy in which Deliveroo operates, particularly its treatment of the estimated 50,000 cyclists and drivers who haul Deliveroo’s blue food boxes through busy city streets in the nearly 800 towns and cities the company serves.

According to a recent report from Bloomberg, six major U.K. investors announced prior to the IPO that they would not buy shares in Deliveroo because of the way the company treats its workers. Deliveroo’s drivers and couriers are self-employed and therefore not eligible to receive minimum wage or sick pay. 

A recent ruling by the U.K.’s Supreme Court that Uber drivers are workers who are entitled to minimum wage, among other benefits, was yet another concern for many investors, who see a similar trajectory for gig workers at companies like Deliveroo.

Meanwhile, retail investors will have to wait to trade Deliveroo shares until conditional dealings end on April 7. And because Deliveroo’s IPO was conducted under conditional trading terms, the company can still cancel the IPO and void any trades of its stock before April 7.