Deliveroo Holdings PLC (LON:ROO) plunged on its first day of trading after pricing its IPO at the bottom end of the range, valuing the tech unicorn at £7.6bn.
Over 384mln shares were placed at 390p, but the stock was trading at as low as 271p earlier on Wednesday after opening at 331p.
The food delivery service raised £1.5bn, with the option to increase to £1.65bn with the over-allotment option, which will be used to boost growth plans.
It previously said shares would be offered at 390p-460p a pop, pushing the market capitalisation to up to £8.9bn, but then cut the target to 390p-410p citing volatility.
It’s still the largest flotation seen in London since Glencore joined the market in 2011.
A host of big-name institutional investors, including Standard Life Aberdeen PLC (LON:SLA) and Aviva PLC (LON:AV.), had publicly shunned the offer on concerns over the status of its delivery riders and its business model.
The prospectus highlighted its drivers are paid as contractors but in the future there is the possibility the company might have to classify them as employees with benefits such as sick pay and holidays.
The firm also allocated up to £50mln worth of shares to its UK-based customers, restaurants and riders through PrimaryBid, although they won’t be able to trade until next Wednesday when unconditional dealings begin.
The loss-making company has been under fire for governance issues, with an investigation by The Bureau Local revealing that many workers were paid well below the legal minimum wage.
The Independent Workers’ Union of Great Britain (IWGB) called for riders to go on strike on April 7.
Another issue was said to be the dual share structure that will enable founder Will Shu to exercise more control over the business once it is listed, although this two-tier option was said to be one of the reasons the company decided to float in the UK.
“It is maybe a case of a perfectly zeitgeisty company in one sense – Deliveroo is a primary pandemic beneficiary – coming of age in the wrong moment, i.e. in the era of ostensible environmental, social and corporate governance,” said Connor Campbell at Spreadex.
“And before asset managers start feeling too angelic, the fact Deliveroo is yet to make a profit, even with the help of the pandemic, is likely also a cause for concern.”