Deliveroo PLC has confirmed its plans for an initial public offering (IPO) on the standard segment of the main market of the London Stock Exchange.
The food delivery app, which operates in around 800 locations across 12 markets, also reported an update on its current trading, reporting that for 2020 it generated an underlying loss of £223.7mln, narrower than the £317.3mln loss in the prior year, while its gross transaction value (GTC), the total amount of transactions processed on its platform, soared by 64.3% to £4.1bn.
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The transaction boom came as the coronavirus (COVID-19) pandemic and resultant lockdown measures forced people to stay indoors and rely heavily on delivery firms for food and other essentials. The shuttering of restaurants also led to a sharp surge in demand for takeaways, Deliveroo’s prime business area.
As part of its IPO plans, Deliveroo said it will include a community offer which it said will allow UK-based account holders to apply for shares in the company, although the pricing of shares for the float has yet to be revealed.
‘’Deliveroo’s intention to launch onto the London market is the latest in a steady stream of IPOs in the first two months of 2021, but with its unicorn status, it’s likely to be the biggest coup in terms of size. It’s currently valued around £5 billion after it raised £129 million in investment in January, but is expected to float with a valuation closer to £7 billion”, said Susannah Streeter at Hargreaves Lansdown.
“Delivery companies have come into their own during the pandemic as people have had little option but to switch to dining in at home instead of eating out. Deliveroo has been benefiting from this takeaway trend with rising revenues and clearly the company has judged that the time is ripe to go public. Appetite for a slice of the delivery sector is high, just look at the incredibly successful Door Dash IPO in the US which saw shares rise 86% above their initial public offering price”, she added.
However, Streeter also noted that competition in the sector remained tough which could, in turn, impact the business as the impact of the pandemic eased.
“Deliveroo competes with Uber Eats, Just Eat and a host of others. Profitability can be tough and margins tend to be slim thanks to competition and high variable costs. But the potential is there for strong returns if the logistics can be performed well and a company can establish itself as a fixture of the industry. There is of course a risk that demand for home deliveries will wane once the pandemic has eased. It’s likely that the public will be desperate to eat out as soon as they can, ditching a knock on the door and a bag of food for a real restaurant experience”, the analyst added.