Amazon.Com Inc AMZN-backed food delivery app, Deliveroo’s shares plummeted 30% in the company’s London initial public offering (IPO) Wednesday, hitting the lows of 271p within the first 20 minutes of trading, the Financial Times reports.
What Happened: The stock plunge fuels doubts about listing British tech companies in the U.K.
Deliveroo had set its opening share price at the lower end of the target range 390p following corporate governance criticism from prominent British investors.
The IPO had valued Deliveroo at close to £7.6 billion, the highest in London since resources group Glencore PLC’s GLNCY GLCNF 2011 IPO. But Deliveroo rapidly lost over £2 billion in market value in the first moments of its listing.
Interestingly, U.S. counterpart DoorDash Inc’s DASH stock gained over 86% on the first day of its NYSE listing. However, it knocked off over a third of its value since mid-February.
However, Deliveroo asserted significant investor demand and oversubscribed the deal as of Tuesday despite the price reduction.
Deliveroo raised £1 billion in gross proceeds from the £1.5 billion share sale to invest in new growth initiatives like Editions network of delivery kitchens. Existing investors will cash in worth £500 million.
Deliveroo revenues jumped 54% following a pandemic-induced boost to the takeaway orders after losing £224 million last year.
Why It Matters: Deliveroo’s largest investor, Amazon, offloaded shares worth £91 million in the IPO, while Deliveroo CEO Will Shu cashed in £26 million.
Certain early investors offloaded 10% of their stake. Several U.K. asset managers did not participate in the IPO due to regulatory risk and corporate governance concerns, mainly the dual-class structure.
Deliveroo’s pre-IPO investors cannot sell further shares for up to 180 days, as per lock-up rules.
Price action: AMZN shares traded higher by 1.63% at $3,105 on the last check Wednesday.
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