Rishi Sunak backed the wrong horse. If the chancellor wanted to promote the London stock market as a warm and loving place for smart 21st-century companies, Deliveroo was the wrong firm to hail as “a true British tech success story”. A 26% first-day plunge in the share price for a £7.6bn float is a shambles.
Goldman Sachs and JP Morgan, which were in charge of the listing operation, are primarily to blame. They got their numbers hideously wrong. As the price range for the float was lowered this week, the investment banks pumped out a misleading message that the order-book for shares was “fully covered”. Well, it obviously wasn’t covered by the right people in the right quantities. Hedge funds, the marginal buyers in these situations, smelled weakness and sold at the first opportunity.
The intriguing question is why rock-solid support didn’t materialise. Theory A says this was a rebellion by old-school UK fund managers against Deliveroo’s perceived governance abuses, such as the supercharged voting rights for chief executive and co-founder Will Shu.
To a degree, that factor was probably at play. Lord Hill’s review of the listing regime proposes allowing companies with unequal voting structures to be included in stock market indices. Opponents hate the idea, seeing basic unfairness and bad long-term consequences. Deliveroo presented a chance to voice discontent.
But was it the main factor in spoiling the mood? It seems unlikely. A few UK objectors (against a listing reform that hasn’t happened yet, remember) would not normally throw a global investment roadshow into confusion. Theory B sounds more plausible: Deliveroo was simply overcooked at £7.6bn.
On that score, the company should look in the mirror. Shu never convincingly answered the “gig economy” question: would Deliveroo’s model of food delivery work if riders have to be given contracts and regular employment rights?
Instead, the company stuck rigidly to the line that riders earn £13 an hour “at our busiest times”, which came across as an exercise in using data selectively. What do they earn on average? Deliveroo lost £225m at an operating level last year. Investors wanted to hear some vague reassurance that profitability won’t be perpetually out of reach if riders get rights.
The company can console itself that it has raised its £1bn of fresh capital. Shu can stop banging on awkwardly about how there are 21 “meal occasions” in a week and get back to work, which is possibly how he prefers things.
But Sunak should also keep his head down. There are still good UK tech companies out there – and many use technology for more uplifting purposes than delivering takeaway meals by bicycle. They don’t need the accompaniment of hype from the chancellor when they come to market. Most, let’s hope, will regard the chaotic nature of Deliveroo’s float as a special case, which is probably the right way to view events. Whether it’s tech or non-tech, sellers shouldn’t be greedy on price.
It was only a matter of time before Denise Coates, chief executive of Bet365, would pay herself more than £365m in a single year, and the moment has arrived. The sum was £421m in the 12 months to March last year. Since the next accounts will cover the pandemic period that brought the gift of bored customers working from home, it’s odds-on she’ll pass the round number of £500m next time out.
Coates clearly runs a slick operation and, to her credit, she pays herself in plain-vanilla payroll fashion via a UK-domiciled company, meaning she’s a very substantial taxpayer as well as giver to charity. Others would have relocated to Monaco by now.
She is, though, infuriatingly shy about revealing where Bet365 makes its money. The company never publishes a geographical breakdown of revenues, as publicly listed companies have to do. It is clearly unbothered by allegations that it accepts wagers from China, where individuals risk prison for placing online bets.
The geographical mystery limits the pool of potential buyers should Coates ever wish to sell the business – or, at least, the sale price would be depressed. So one must assume neither a float nor a sale is on the cards. Just an annual succession of extraordinary paydays.