Deliveroo shares tumble in U.K. stock market debut

Shares of the app-based meal delivery service fell even after they were priced at the bottom of the potential range

Shares of app-based meal delivery service Deliveroo tumbled by as much as a third in their U.K. stock market debut on Wednesday.

The London-based company’s shares fell even after they were priced at the bottom of the potential range, reflecting investor wariness about whether Deliveroo could turn a profit and broader market turbulence for tech-related stocks.

The slump also reflects a growing backlash against “gig economy” companies, with half a dozen leading U.K. fund managers abstaining from the Initial Public Offering (IPO) amid concerns about working conditions for Deliveroo’s delivery riders, and its shareholder structure.

Shares in Deliveroo Holdings, which competes with Uber Eats and whose backers include Amazon, finished the day down 26% from their offer price of 390 pence, after dropping as much as a third in early trading.

Deliveroo’s IPO was one of Europe’s biggest and most hotly anticipated this year. The company raised 1 billion pounds ($1.4 billion) from selling new shares, while existing shareholders sold another 500 million pounds worth of shares, in a stock market listing that values the company at 7.6 billion pounds.

Founded by CEO Will Shu, Deliveroo operates in a dozen countries in Europe and Asia. According to its prospectus, more than 6 million customers order food from restaurants and shops through the Deliveroo app every month.

In this next phase of our journey as a public company we will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work, Shu said in a statement.

Deliveroo has never turned a profit since it was founded in 2013 though it benefited last year from the pandemic, which helped narrow its annual loss to $309 million. Lockdown restrictions sent demand for takeout food soaring and increased its overall transactions, but analysts wonder if the lift will last.

The pandemic has offered a structural growth opportunity, but it´s worth asking if lockdowns mean things are as good as they will ever be for a takeaway service, Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said in a research note. The longer-term outlook depends on how demand holds up in a post-pandemic world, and if that road to profitability looks any clearer.