Deliveroo kicks off London IPO as it narrows 2020 losses

The company's offer will include new shares and some of its existing shareholders will sell down their stakes

Deliveroo has narrowed its 2020 losses on strong operational performance. AFP

British food delivery company Deliveroo kicked off its initial public offering that could raise billions of pounds in potentially the biggest public float on the London Stock Exchange in years as it narrows its 2020 losses.

Deliveroo's offer will include new shares to be issued by the company and some of its existing shareholders will also sell down their stakes, it said in a statement on the LSE on Monday.

The Amazon-backed company, which was valued at approximately £7 billion ($9.68bn) in its $180 million funding round in January, did not say when it plans to list its shares.

Deliveroo, founded in the UK capital by Will Shu in 2013, last week said it picked London as its listing destination following the UK's plan to overhaul listings regulations in a post-Brexit shake-up.

The company plans to use the dual-class share structure proposed by Jonathan Hill in a review of the city's listing criteria for its IPO. Its Class B shares, on admission, will be held solely by Deliveroo's founder. They carry 20 votes for each share, while its Class A shares will be entitled to one vote for every share.

“Only the Class A shares will be offered in the IPO and admitted to the Standard Listing segment” to trade on the main market of the LSE, the company said.

“The structure will last for three years from [the] IPO. On the third anniversary of an IPO, the Class B shares will automatically convert into Class A shares.”

Last week, Deliveroo said its “potential future float” intends to provide Mr Shu “with the stability to take decisions to enable the company to execute on its long-term strategic vision".

The potential listing may put the LSE on track for its best-ever first quarter. This year, 13 firms have raised £4.3bn in London and Deliveroo is anticipated to add billions more to this tally before the end of this month.

Deliveroo has seen demand for its services rise in 2020 on the back of the pandemic-driven online food-delivery boom. Gross transaction value – total transactions processed on its platform – grew by 64.3 per cent last year to £4.1bn from £2.5bn in 2019.

“Despite this significant growth, online food delivery is still at an early stage, presenting enormous growth potential,” the company said.

The restaurant and grocery sectors represent an addressable market of £1.2 trillion in Deliveroo’s 12 markets, of which just 3 per cent of sales are estimated to be online, it said.

The company’s underlying gross profit in 2020 climbed 89.5 per cent to £358m from a year earlier. Its net profit for the reporting period narrowed to £223.7m, compared to £317m in 2019.

The company said it continues to remain focused on investing in driving growth and expanding its services.

“We are building delivery-only kitchens, delivering groceries, building tools for restaurants to take them into the digital age,” Mr Shu said.

On Sunday, the company said it plans to give £16m of payments to its riders globally as part of its stock market listing. The payment, to be made from a “Thank You Fund”, would be launched on the day of Deliveroo's IPO. Active riders in all its markets, including the UAE and Kuwait, will be eligible for the payment.

Deliveroo works with more than 140,000 restaurant partners across 800 cities.