IPO Flop Hurting Business Image
Shares of the food delivery business plunged in today’s London trading session after the company said that its rapid growth is likely to slow down going forward. Still, the food delivery business said it made “significant progress during the first quarter.”
In the first update since its troubled IPO, Amazon-backed Deliveroo reported that Q1 orders more than doubled on a year-over-year (YOY) basis to £71 million ($97.87 million). The value of transactions on the food delivery platform surged 130% to £1.65 billion ($2.27 billion).
“We are delighted with the Deliveroo Q1 results. Demand has been strong in both the UK&I and International markets driven by record new consumer growth and sustained engagement from our existing consumers. This is our fourth consecutive quarter of accelerating growth, but we are mindful of the uncertain impact of the lifting of COVID-19 restrictions,” the food delivery business said in a statement.
Despite great Q1 results, Deliveroo stock fell after the company said its approach going forward is “prudent” as it remains committed to the full-year guidance it communicated during its IPO process. This means Deliveroo is expecting gross transaction value (GTV) to rise between 30% and 40%, while gross profit margins are expected to surge 7.5% to 8%.
“While we are confident that our value proposition will continue to attract consumers, restaurants, grocers and riders throughout 2021, we are taking a prudent approach to our full year guidance.”
The company said that its active consumer base on a monthly basis had grown 91% YOY to 7.1 million consumers on average in Q1. The business has been strong in the company’s key market of the United Kingdom (UK) and Ireland, where GTV exploded 142%.
“The growth comes from all regions and the Company has strengthened its leadership position in London, with GTV in London growing by over 120% year-on-year,” the statement adds.
Still, the company’s brand image has been hurt by a weak IPO. Analysts argued that the company underperformed in its IPO due to high valuation, gig workers’ rights issues, and strong competition in the emerging food delivery business industry. Some of the biggest British investment funds announced they wouldn’t participate in the IPO given the above-listed concerns.
Shares of the business are down over 30% from the IPO price of £3.90 ($5.38) to see the business valuation plunge to $6.4 billion, which is less than the business valuation of $7 billion during the final private financing round before the IPO.
The company’s valuation dipped below the valuation recorded in the latest financing round, which is one of the key reasons why analysts say that Deliveroo IPO is arguably the worst UK public offering in recent history.
Food delivery company Deliveroo reported strong growth for its Q1, but it still didn’t upgrade the forward-looking guidance, which sent its stock 2% lower in London today.
About the Author
Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.