Deliveroo on Monday confirmed its plans to be listed on the London Stock Exchange following an increase in business during the pandemic. The total value of transactions processed on its platform rose 64% last year to £ 4.1 billion ($ 5.7 billion).
But the tech company still recorded an underlying loss of £ 224 million ($ 310 million) in 2020, raising doubts about its valuation. According to Reuters, the listing is expected to value Deliveroo at more than $ 7 billion, but other media reports have set the target at up to $ 10 billion.
“This valuation of Deliveroo seems excessive for a business that still has many years of profits, especially considering that some have a significant doubt as to whether the takeaway delivery model at home can be profitable outside of London,” he said. say John Colley, associate dean of Warwick Business School.
“In fact, the only basis for this valuation appears to be the immense amount of cash seeking growth technology stocks,” Colley added.
Rider reward
Deliveroo has more than 100,000 drivers and 115,000 food traders in 12 markets around the world. The company said it has set up a fund to support restaurants and help them recover from the pandemic. It also aims to provide pilots with £ 16 million ($ 22.2 million) in bonus payments.
The company said in a statement that “hundreds” of active pilots would receive the maximum bonus, with the highest payments to those who have completed more orders in each market. All riders who have worked with Deliveroo for at least a year and completed 2,000 orders will receive £ 200 ($ 277). The average payment per eligible pilot will be £ 440 ($ 610). The fund will be launched on the day of the IPO.
“Today, the business is so big, than I ever would have thought possible,” CEO Will Shu said in a letter released Monday. “Still, we really believe we’re still getting started. Our ambitions have increased as we begin to truly understand and execute the opportunity we have in front of online food.”
However, there may be other challenges ahead.
“The Supreme Court’s recent finding that Uber drivers are ‘workers’ and have certain rights, such as paid vacation and pensions. This finding may also apply to home delivery to take away, increasing their costs,” he said. dir Colley.
“Ultimately, Deliveroo will have to charge customers and restaurants a lot more for profits, but that comes with its own difficulties. For restaurants, margins are already reduced. And at what price customers decide to simply pick up their own meals. ? ” he asked.
The UK government said last week that it would revise rules banning companies with dual-class structures from joining major FTSE indices. It is unlikely that changes will be made in time for the Deliveroo listing, but the company could become eligible if the listing standards are updated.