Deliveroo kicks off London IPO, bolstering busy UK market

[LONDON] Food-delivery company Deliveroo kicked off an initial public offering in London that could raise billions of pounds and put the UK market on track for its best-ever first quarter.

The startup plans to raise capital by selling new stock, while existing holders also will sell shares, according to a statement Monday that didn't provide details on the size of the planned offering. The Amazon.com-backed company was valued at more than US$7 billion in its latest funding round.

Deliveroo will list with a dual-class share structure, effective for three years, to provide chief executive officer Will Shu with the stability to execute long-term plans, the company said last week. As such, the stock is ineligible for the London Stock Exchange's premium segment and can't be included in benchmark indexes such as the FTSE 100, despite its expected size.

This year, 13 firms have raised £4.3 billion (S$8.01 billion) in London, data compiled by Bloomberg show. And Deliveroo is anticipated to add billions to this tally before the end of the month, meaning the UK IPO market could be on course to surpass its biggest first quarter on record in 2006, when proceeds reached £6.4 billion.

London-based Deliveroo's planned offering follows the publication of a government-backed report last week that made a slew of recommendations to reform UK listing rules. The proposals include allowing dual-class share structures on the premium segment of the LSE, but it could be months before these are effective, confining the company to the standard listing segment for now.

Deliveroo's Class A shares, to be offered in the IPO, will have one vote each, while Mr Shu will hold all of the Class B shares that carry 20 votes each. On the third anniversary of the IPO, the Class B stock will automatically convert into Class A.

Such structures could be gaining traction among UK-based technology startup founders. E-commerce operator THG set up a golden share, which allows its founder to fend off unwanted takeover bids for three years, in its £1.88 billion offering in September, London's biggest since mid-2017. The stock has risen more than 30 per cent since then.

Dual-class shares are more common in the U.S., used by the likes of Google parent Alphabet and Facebook, where the weighted voting rights are kept in perpetuity. Some investors have balked at bringing the practice to the UK, saying it dilutes corporate governance norms by allowing founders to retain control after taking their companies public. Both THG and Deliveroo put in a sunset clause, meaning a time limit, on this share structure, mitigating the risks for post-IPO shareholders.

BLOOMBERG