London (AFP) -
Deliveroo skidded on its stock market launch on Wednesday, with share prices slumping by almost a third in value after the app-driven meals delivery company faced criticism from institutional investors over its treatment of self-employed riders.
Deliveroo's initial public offering (IPO) was London's biggest stock market launch for a decade, valuing the group at £7.6 billion ($10.4 billion, 8.9 billion euros), after the eight-year-old company enjoyed surging sales during the coronavirus pandemic as locked-down people ordered in.
But the British group's shares plunged as low as £2.71 after an IPO set at £3.90 -- already the bottom of its target-range.
'Deliveroo has gone from hero to zero as the much-hyped stock market debut falls flat on its face,' noted AJ Bell investment director Russ Mould.
'Initially there was a lot of fanfare about the Amazon-backed company making its shares available to the public, including the ability for customers to buy stock in the IPO offer,' Mould said.
'Sadly, the narrative took a turn for the worst when multiple fund managers came out and said they wouldn't back the business due to concerns about working practices.'
- 'Continue to invest' -
Deliveroo shares opened down 15 percent before institutional investors -- the first allowed to buy and sell Deliveroo shares -- pushed down its price further.
There was a brief halt in trading of its stock owing to volatility, while at around 1000 GMT its shares stood at £2.96, a drop of 24 percent.
Deliveroo is selling just over one-fifth of the group, while the general public can start trading in its shares from April 7.
Group founder and chief executive Will Shu on Wednesday said that as a public company, Deliveroo 'will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work'.
Deliveroo maintains that its riders -- around 100,000 across 800 cities worldwide -- value the flexibility the job affords.
However, its business model has come under scrutiny, including in Britain, France and Spain, over conditions.
The highly anticipated float has been overshadowed by small-scale protests, strikes and rallies in Australia, Britain and France, with more set to follow.
- London boost -
Deliveroo's listing is seen as a major boost to London's financial sector, known as the City, which earlier this year lost its European share trading crown to Amsterdam following Brexit.
The stock market float was London's largest since Swiss miner Glencore's IPO in 2011 valued at almost £37 billion.
Deliveroo is making a portion of its stock available for customers, with delivery riders and restaurant partners also able to participate.
The company has adopted a dual class share structure, giving Shu 20 votes per share while all other shareholders get one vote per share.
'Concerns over working conditions for its riders were... cited as one of the reasons for the reluctance to invest,' said Michael Hewson, chief market analyst at CMC Markets UK.
However 'there are probably a number of others, including the dual class structure which restricts the voting rights of ordinary shareholders and gives CEO Will Shu, majority control over any significant board decisions', he added
Hewson said that 'recent weakness in the share price of a number of its peers in the US, like Doordash, appears to have taken some of the shine off the sector'.
Britain's antitrust regulator last year approved Amazon's 16-percent investment in Deliveroo after an in-depth probe concluded it would not harm competition.
In 2020, more than six million people ordered food and drink every month via Deliveroo's app from 115,000 cafes, restaurants and stores.
But it still ended up with a hefty loss owing to rising costs.
Pressure has meanwhile intensified on the wider 'gig' economy to improve staff conditions after Uber earlier this month granted its UK drivers worker status, with benefits including a minimum wage.
A world first for the US ride-hailing giant, Uber moved after Britain's Supreme Court ruled that its drivers were entitled to workers' rights.