Amazon-backed food deliverer Deliveroo plunged after its London IPO
Fish and chips on the Thames... Deliveroo is the UK's equivalent of DoorDash. But instead of zipping around in Toyota Camrys, 80% of its "drivers" deliver on bikes (with big turquoise food backpacks). In 2020, Deliveroo controlled 1/3rd of the UK food delivery app market and ~20% of Europe's. After DoorDash's blowout IPO in December, Deliveroo became one of Europe's most-hyped IPOs:
- The Amazon-backed food deliverer went public on the London Stock Exchange yesterday, in Britain’s largest-ever tech listing by value. Amazon-backed food delivery sounds buzzy — but the stock plunged 26% on Day #1 of trading.
Chips arrived soggy... Like Uber and Grubhub, Deliveroo relies on the flexible gig worker model to run its biz. But lately it's been feeling pressure over workers’ rights. Investors are worried Deliveroo might face the same regulatory fate as Uber, which recently had to reclassify all its UK gig drivers as "workers." If Deliveroo also ends up having to provide workers with benefits like vacation pay, its balance sheet could take a big(ger) hit.
- Deliveroo is already deeply unprofitable. It lost $220M+ in 2020, and has yet to see a profit. That scared off investors.
- Also... the "pandemic edge" is fading. DoorDash shares have plunged 40% since their early February high, as we reunite with restaurant bread bowls.
Geography can shape markets... US markets (see: the Nasdaq and the NYSE) are used to seeing unprofitable tech companies soar. Deliveroo's listing is a test for the London market, and its acceptance of these growth-obsessed startups. Also: while the gig economy scored a major victory in CA's passing of Prop 22, gig work is coming under increasing scrutiny in the UK — and it's not a state-by-state thing. If Deliveroo had to reclassify workers there, it would affect its entire UK biz... which makes up nearly half its sales.