Take that, Amsterdam (and New York)! Takeaway food delivery firm Deliveroo has confirmed that it plans to list its shares in London.
The technology company, which is expected to have a market capitalisation of around US$7bn when it floats, is set to take advantage of controversial new proposals to relax restrictions on dual-class shares, which typically are designed to ensure the founders of a company can more easily maintain control of their “baby”.
In years gone by dual-class share structures were typically favoured by Britain’s “beerage” – (erstwhile) brewers such as Fuller, Smith & Turner and Young & Co – but they are all the rage among technology companies in the US, where being a control freak is often seen as being a good thing (especially by the founders).
The UK’s distaste for dual-class shares was in danger of leading to London missing out on sexy and highly profitable initial public offerings (IPOs) by technology companies but a review of London’s listing rules, led by Lord Jonathan Hill, the former European Union commissioner, came out in favour this week of allowing dual-class structures on the main market of the London Stock Exchange.
The recommendation is seen as not only a lure to technology companies considering a listing in London but as an incentive for special-purpose acquisition companies (SPACs) – also known as “blank cheque investment vehicles” – to list in the UK capital.
"London is a great place to live, work, do business and eat. That's why I'm so proud and excited about a potential listing here," said Will Shu, the founder of Deliveroo.
"After eight years of operations and rapid expansion around the globe, choosing London underlines Deliveroo's commitment to making the United Kingdom its long-term home," the group’s statement said.
The chancellor of the exchequer, Rishi Sunak, clearly considers the decision to be a feather in London’s cap.
The Deliveroo statement included comments from “Dishy Rishi”, who has been known to moonlight as a waiter during the UK’s controversial “eat out to help out” scheme last year – a scheme that did few favours to Deliveroo.
“The UK is one of the best places in the world to start, grow and list a business - and we're determined to build on this reputation now we've left the EU," Sunak said in the Deliveroo statement.
Neil Wilson of markets.com noted that Sunak endorsed Lord Hill's review in yesterday's Budget.
"The dual-class structure would be permitted for a maximum of five years and voting rights would be capped at a ratio of 20:1. It will also see the free float requirement lowered to 15% of available shares from the current 25%, and it will create a much easier regime for SPACs – blank cheque companies that are created with the aim of acquiring another business," Wilson said.
"Tech firms may be attracted to London as a result of the changes. Between 2015 and 2020, London accounted for only 5% of IPOs globally, in large part down to the appeal of Asia and New York for tech firms but equally it’s about the depth of the market and multiples – are we really able to raise the kind of investment into tech start-ups from London that US bankers can achieve for Silicon Valley?" Wilson wondered.
Michael Hewson of CMC Markets said it was a welcome boost to the London IPO market.
“With its finances only recently bolstered by US$180mln of new funding from its stakeholders of Fidelity and Durable Capital Partners in January, the company could fetch a valuation of up to £8bn. Deliveroo also has operations across 200 cities in Asia, as well as in Europe, and is likely to see plenty of interest given that the IPO of DoorDash in the US did fairly well with Deliveroo’s backers also having stakes in the DoorDash business, so they know the sector well,” Hewson observed.