British food delivery start-up Deliveroo picked London for its £8 billion ($11.15bn) stock market flotation on Thursday in a move prompted by the UK's plan to overhaul listings in a post-Brexit shake-up.
Deliveroo, which was founded in the UK capital by Will Shu in 2013, said it would use the dual-class share structure proposed by Jonathan Hill in a review of the City's listing criteria for its initial public offering.
The Hill Review, unveiled alongside UK Finance Minister Rishi Sunak's budget on Wednesday, recommended updating rules around free float requirements, dual-class structures and special purpose acquisition companies to strengthen the UK's position as a world-leading financial centre.
"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," Deliveroo chief executive Will Shu said on Thursday.
Deliveroo confirmed its decision to list in London followed the publication of Mr Hill’s UK Listing Review, which proposed to allow dual-share class structures in the London Stock Exchange premium listing segment. This allows founders to retain control over their companies by giving them deciding votes on key decisions such as corporate takeovers.
Deliveroo said its “potential future float” would “adopt a time-limited, dual-class share structure” to provide Mr Shu “with the stability to take decisions to enable the company to execute on its long-term strategic vision".
The company said its dual-class structure will “closely align with the recommendations set out in the review”, a boon for Mr Sunak who commissioned the review to help lure tech companies to the City.
"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,” Mr Sunak said on Thursday.
“That's why we are looking at reforms to encourage even more high growth, dynamic businesses to list in the UK. So, it's fantastic that Deliveroo has taken this decision to list on the LSE. Deliveroo has created thousands of jobs and is a true British tech success story."
The Deliveroo float, one of the most eagerly anticipated IPOs for London in the first half of 2021, will mark the biggest new share issue in Britain for three years. Initial reports expect the listing to take place in the spring.
The takeaway meals app said its commitment to London was underscored by the company’s role in supporting 47,000 jobs in the UK, including 38,300 in the restaurant sector, as well as thousands of self-employed riders since it started operations eight years ago.
Along with other home-delivery businesses, the company saw demand soar during the pandemic.
The significant growth potential for the online food delivery sector was another spur for the company’s listing plans, it said, as it also has “ambitious growth plans” for 2021. These include expanding its ‘Editions’ delivery-only kitchens and on-demand grocery, as well as new tech tools to support restaurants and offer riders more work.
Deliveroo works with 140,000 restaurants in 800 cities to deliver meals to customers' homes, however, its business has come under scrutiny in Britain, France and Spain, as its freelance delivery riders complain of working conditions, reflecting wider concerns over their rights in the gig economy.
The Hill Review London recommendation to introduce dual-class share ownership to let founders keep greater voting power is similar to those used by US tech companies, including Facebook.
LSE Group chief executive David Schwimmer welcomed the news earlier this week and said continuing to “evolve the UK listings regime is key to providing flexibility for companies who want to list in London”.
The City is already enjoying a bumper year for new listings, with IPOs such as bootmaker Dr. Martens, which had entered the FTSE250, and online greeting-card platform Moonpig Group raising £3.3bn in 2021 – the most for this time of the year since 2006.
Other companies expected to list this year include Russian retailer Fix Price and review site Trustpilot.
Claudia Arney, chairwoman of Deliveroo, said the food delivery firm was “proud” to be a British company with the selection of London as its home for any future listing reflecting its “continued commitment to the UK”.
"The time-limited, dual-class structure would provide Will and his team with the certainty needed to execute against their ambitious growth plan to become the definitive online food company. We welcome Lord Hill's recommendations to support modernisation of the market and continued tech sector growth in the UK," Ms Arney said.