His disastrous debut should curb London’s deregulatory drive, yet to materialize
Pressure from the City of London to ease listing rules has just suffered a major setback. Deliveroo shares plunged as much as 30% on Wednesday morning, as investors backed away from its highly publicized public offering for sale, which valued the meals-on-wheels company at 7.6 billion pounds (8.9 billion euros). ). British politicians saw the deficit group as an attractive appetizer for their campaign aimed at persuading more businessmen to go public in London. Failure should make them rethink it.
The eight-year-old company met many requirements for authorities eager to remove obstacles that might deter startups to be listed in London.
Two government-sponsored reports have proposed allowing companies with supervoted shares to obtain a “premium” listing on the London Stock Exchange. Deliveroo founder Will Shu has introduced a structure that allows him to maintain control of the company, even if he only owns 6%.
Politicians are also keen to facilitate the participation of retail investors in the stock offerings: Deliveroo sold 50 million pounds (59 million euros) worth of shares to 70,000 customers who signed up via its smartphone app.
Although the government has yet to formally change its rules, it viewed Deliveroo’s decision to list in London as a first endorsement of the reform. Finance Minister Rishi Sunak called the news “fantastic” earlier this month.
The Deliveroo debacle should curb the deregulatory momentum. Institutional investors who rejected the offer, such as Aviva and Aberdeen Standard Investments, now have more arguments to keep companies with supervoted stocks off benchmarks like the FTSE 100.
Politicians will presumably rethink whether to encourage retail investors to invest their savings in risky stocks. Meanwhile, plans to facilitate the IPO of Special Purpose Acquisitions Companies (SPACs) in London will also face increased scrutiny.
A probably more cautious approach to deregulation may force other startups like Wise, the payments company, to rethink their listing plans. It can also get more British companies to follow Cazoo, the online car dealer that this week filed a merger with a US-listed SPAC.
But it was always a mistake to hastily rewrite the trading rules in the midst of a stock market boom. In the long run, Deliveroo may have done investors a favor.