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Deliveroo IPO a U.K. Disaster

03/28/2021

Deliveroo a U.K.-based food delivery service established eight years ago planned to raise $1.4 billion in an IPO.  Currently Amazon owns 16 percent of the equity following an investment of $580 million in May 2019.

A number of large U.K investment groups  indicated they intended to give ROO a pass prior to the IPO. Apart from the image of the company underpaying their "independent contractors" potential investors balked at the dual-class voting structure for shares offered.

 

In FY 2020 Deliveroo lost $300 million but grew revenue by 54 percent to $1.6 billion, representing a negative profit margin of 18.8 percent. The Company is less than attractive since there is a general perception of exploitation of gig-economy workers. In the event the IPO was poorly received. Despite being priced at $5.40 at the bottom of the previously announced range, ROO finished 26 percent down on the first day of trading.

 

Increased revenue for ROO and its competitors in 2020 was attributed in large measure to COVID-related restrictions and it is uncertain that the trend in increased revenue will continue past mid-2021. Generally none of the delivery services either in the E.U. or the U.S. generates a profit although the emphasis has been on increasing market share and revenue through intense competition based on gig-workers.