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Weekly Short
18 March, 2021
Tell Sid, Deliveroo wants your money.
In an apparent gift to its riders, customers and colleagues, Deliveroo has opened-up its upcoming IPO to them all.
It’s like the 1980’s all over again, share ownership for all. This was, and can remain, a powerful message of levelling up, of tackling inequality and democratising investment.
But it isn’t quite what it seems. The ‘Tell Sid’ and other campaigns in the ‘80s were offering mass share ownership to the public in some of our most trusted utilities – telephones, energy, and transport. These businesses were large and robust, they’d been around for a long time and were, indisputably, a pretty safe bet. Until recently, Deliveroo had never made a profit, and only last year was effectively bailed-out by Amazon (the Competition and Markets Authority put aside their concerns about the purchase, because the business would have gone under without the injection of capital).
Now, it’s true that, while we have been locked in our homes, Deliveroo has seen rapid growth in customers and orders, and the value of those orders. But questions surely remain about whether the fundamentals of the business have changed dramatically since the bail-out and what will happen when lockdowns lift. And then we also need to factor in the billion-dollar valuation.
Is it really fair to offer this inflated valuation to people who may not be able to judge whether it’s good value or not? And some commentators would say that, if a company is trying to offer shares to lots of small shareholders, it may well be because the big institutions don’t think it’s good value…
This is not BT or British Gas, boringly providing core services to people in a way that they have been doing for years. This is an exciting, yet still unproven, digital business with a vast valuation. As the small print always says, the value of investments can go down as well as up. Perhaps the important point here is that responsibility, in the business context, should be as much about how you raise your investment as how you then spend it.
By Marie Guérinet