Deliveroo stock slumped 23% on the London Stock Exchange on Wednesday, and the app-driven food delivery group was criticized for its treatment of drivers.
Deliveroo’s IPO was London’s largest IPO in a decade, valued the group at £ 7.6 billion ($ 10.4 billion) after the eight-year-old UK company saw sales surge during the coronavirus pandemic when banned people came in.
Deliveroo said earlier this week that there has been “very significant demand from institutions around the world, but some asset management firms have decided not to buy stocks, citing job insecurity and the conditions of their drivers.
It slipped on its market debut and stocks fell from 3.90p to 3.02 pence after an IPO.
Trading fell 15% before institutional investors – the first to be allowed to buy and sell Deliveroo stock – pushed their price down further.
Deliveroo is selling just over a fifth of the group, while the general public can start trading its shares from April 7th.
“I am very proud that Deliveroo is going public in London – our home,” said founder and CEO Will Shu in a pre-trading statement.
“In this next stage of our journey as a public company, we will continue to invest in the innovations that will help restaurants and grocers grow their businesses, give customers more choice than ever before, and give drivers more work.”
Amazon-backed Deliveroo claims its drivers – around 100,000 in 800 cities around the world – appreciate the flexibility the job offers.
However, the business model has been scrutinized in the UK, France and Spain, among others.
The eagerly awaited float was overshadowed by small protests, strikes and rallies in Australia, Great Britain and France, with more to come.
Deliveroo’s listing is seen as a major boost to the London financial sector known as the City, which lost its crown in European equity trading to Amsterdam earlier this year following Brexit.
The IPO is expected to be the largest in London since Swiss miner Glencore went public in 2011, valued at nearly £ 37 billion.
According to Deliveroo, part of the inventory is made available to customers, which delivery drivers and restaurant partners can also participate in.
The company adopts a dual class stock structure that gives Shu 20 votes per share while all other shareholders get one vote per share.
“Concerns about the working conditions for its drivers have been cited as one of the reasons for reluctance to invest,” said Michael Hewson, chief market analyst for CMC Markets UK.
He added, however, “There are likely a number of others, including the dual class structure which restricts voting rights for common shareholders and gives CEO Will Shu majority control over all major board decisions.”
Hewson added that “the recent weakness in the share price of some of his US counterparts, such as Doordash, appears to have taken some of the shine from the sector”.
The UK antitrust authorities approved Amazon’s 16 percent stake in Deliveroo last year after an in-depth investigation found it would not affect competition.
In 2020, more than 6 million people ordered food and drink through the Deliveroo app in 115,000 cafes, restaurants and shops every month.
Even so, there was a significant loss due to rising costs.
Meanwhile, pressure on the broader “gig” economy to improve staffing conditions has intensified after Uber granted its UK driver the status of worker with benefits including a minimum wage earlier this month.
Uber was a world first for the US giant after the UK Supreme Court ruled its drivers were entitled to workers’ rights.