Amazon-Backed Deliveroo Eyes $12 Billion Valuation Ahead Of IPO

Deliveroo has been a big winner from the pandemic, but will its London IPO next week be as successful?

Deliveroo’s market debut could be Britain’s biggest initial public offering in a decade. Deliveroo has set a price target of between £3.90 ($5.39) and £4.60 ($6.36) per share, giving it an implied market value of up to £8.8 billion ($12 billion) and making it one the largest tech IPOs on the London Stock Exchange to date. The company, which is backed by Amazon (NASDAQ: AMZN), is opting for a dual-class share structure which will give its CEO, Will Shu, more voting rights. Deliveroo is looking to raise £1 billion ($1.38 billion) from its IPO. 

Deliveroo said that £50 million worth of shares will be offered to its customers and will be advertised to them using a large banner ad near the top of its app. However, due to the recent rise in retail investors, which resulted in huge fluctuations in the share prices of heavily-shorted stocks like GameStop and AMC, Deliveroo may be vulnerable when it makes its market debut. 

The meal delivery service had a blockbuster year in 2020 but still posted a £224 million ($310 million) loss for the year. With the IPO, Deliveroo hopes to use the funds to improve its platform and explore the grocery-delivery sector, which has become very popular during the pandemic. Shu explained: 

“Becoming a public company will enable us to continue to invest in innovation, developing new tech tools to support restaurants and grocers, providing riders with more work and extending choice for consumers, bringing them the food they love from more restaurants than ever before.”

So, how has Deliveroo performed lately? 

According to an update released Monday, the company: 

  • Doubled the total value of transactions during the first two months of 2021
  • Volumes grew 130% year-over-year (YoY) in the U.K. and Ireland in the same period 
  • Volumes grew 112% YoY in other markets in the first two months of the year as well 
  • Is operating in over 800 locations in 12 markets. 
  • By the end of 2020, it is working with over 100,000 riders, twice the number of riders on its books in 2019. 
  • Has built an on-demand grocery service and is now working with some of the world’s largest retailers, including 7-Eleven, Aldi, and Whole Foods Market.

Deliveroo’s future 

Deliveroo has been on a bit of a roller coaster lately, going from near failure in 2020 when a competition review looked into Amazon’s investment in the company to now reaching profitability thanks to a surge in demand for takeaways during the lockdowns. 

The trend of ordering meals and groceries online is likely to continue to grow when the pandemic is over as the ease of buying from an app will still be attractive even when physical stores and restaurants reopen. In our digitally-driven world, anything that makes daily tasks easier is a big winner. Deliveroo is on a mission to take over the entire food-purchasing app market, making this IPO one to watch for tech and Amazon investors. 

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

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