Deliveroo's Valuation Looks Promising Before Its Fast-Approaching IPO

At the beginning of the year, Deliveroo got itself into a pickle with the Competition and Markets Authority (CMA) in the U.K. The antitrust investigation has since been dropped, and Amazon-backed Deliveroo has sustained its trajectory toward the public market.

Now, things are really moving forward and Deliveroo's valuation looks promising. 

Deliveroo has officially announced its IPO valuation projection with a goal to sell $1.4 billion in new shares. This is huge, especially for the London Stock Exchange where it plans to list.

As a British company in the food delivery sector, Deliveroo has seen marked growth in the last few years. This has been particularly inflated by the COVID-19 pandemic, which has left consumers at home and more likely to order in. 

In November 2020, MarketWatch reported that the food delivery app business more than doubled over the course of the COVID-19 pandemic. It's hard to imagine any industry sustaining that kind of growth, so it's worth considering potential faltering of fiscal metrics in the future. Even then, the numbers could be impressive. Right now, Deliveroo sees major revenue growth while retaining steep losses (as much as $311 million lost in 2020 compared to $5.7 billion in revenue).

With a $1.4 billion IPO, Deliveroo could hit a valuation of $7 billion. The company's most recent private funding round was finalized in January and helped increase its worth. 

The food delivery company doesn't have a shortage of institutional investors, but its focus on retail investors' access to the IPO is interesting. Usually, only institutional or preferred investors get access to shares at the offering price. Deliveroo plans to open up access to IPO shares to retail investors and customers "who register their interest via the company's app," according to Shares Magazine.

Deliveroo is backed by Amazon. The e-commerce giant owns 16 percent of Deliveroo, which adds up to a minority stake. This hefty holding is what got Deliveroo in deep waters with the CMA in the first place. Since then, the fear of monopolization has been overlooked due to economic issues surrounding the COVID-19 pandemic.

Other than Amazon, Deliveroo is backed by numerous venture capital firms like Durable Capital Partners, Fidelity, T. Rowe Price, and General Catalyst, among others. 

While Deliveroo hasn't released a firm debut date yet, investors can expect the day to come in the upcoming weeks.

When it's time to buy Deliveroo, investors will have access to class A common stock, which carries one vote per share. Founder and CEO Will Shu will be the only one to hold the more-powerful class B stock worth 20 votes per share. The deal is only set in stone for three years before reevaluation. The hope is that Shu won't be able to take over the decision-making process indefinitely. 

Retail investors with access to the IPO price can snag the shares right away. Others will have to wait until the Deliveroo ticker pops up on their preferred brokerage sometime midday.