A damning report by an influential City firm has warned the value of loss-making Deliveroo could plummet by another £1.8billion, raising fears over how the company has been governed.
The stock price has already dived by one third since Deliveroo’s disastrous stock market launch on March 31 – prompting critics to brand the firm ‘Flopperoo’.
About 70,000 small investors, tempted by an invitation to buy shares before the float, lost heavily after taking initial stakes of up to £1,000 each.
The Analyst has warned that Deliveroo’s dire performance may worsen. (Pictured: Deliveroo workers from the IWGB striking on the first day of trading on the stock exchange)
Major City firms are currently subject to a research blackout preventing investment banks that worked on the float from publishing research for at least a month after the launch.
But independent research firm The Analyst – which raised the alarm on collapsed payment giant Wirecard and is not subject to the reporting restrictions – warned that Deliveroo’s dire performance may worsen.
Mark Hiley, who runs The Analyst, told The Mail on Sunday: ‘We still think the stock could well fall another 40 per cent before it hits bottom.’
Hiley said: ‘We looked at Deliveroo in January when an IPO was first mooted and it was obvious then that the company was operating in a highly competitive market and was facing legal challenges to its labour practices on multiple fronts.’
Fund managers have more recently queued up to voice concerns about the company.
Hiley’s verdict comes amid warnings that Deliveroo’s advisers may lose millions of pounds after the embarrassing debacle.
His comments are bound to cause jitters among investors who bought shares at the listing price of £3.90 each. On Friday, Deliveroo shares closed at £2.47, down 37 per cent since the share float. The float raised £1.5billion, but it is said to have been dubbed ‘the worst IPO in London’s history’ by its own bankers.
The Analyst is a stock market research firm based in Clapham, South-West London. It has a reputation for publishing bold investment predictions – sometimes challenging prevailing City assumptions.
It is widely recognised as the first whistleblower to have sounded the alarm over Wirecard which was later engulfed in allegations of fraud. The researcher had issued a ‘Red Flag Alert’ on the German group in 2014. Last year, Wirecard filed for insolvency over debts of €3.5billion (£3.16billion).
The Analyst was also one of the first firms to predict shares in Carillion, the construction giant, and department store chain Debenhams were worthless well ahead of their implosion.
Hiley’s concerns about Deliveroo purely relate to the way it is structured and run. There is no suggestion of any wrongdoing.
Mark Hiley of The Analyst warned that senior executives at Deliveroo had been awarded long-term incentives equivalent to 600% of basic pay – one of the highest for a FTSE 100 company
The Mail on Sunday revealed last month that Deliveroo shares were being offered by brokers at Goldman Sachs and JP Morgan at prices considered to be far too high. One major investor described the mooted valuation before the float as ‘ludicrously priced’.
The following week, institutional investors, including Aviva Investors and Legal & General, publicly declared they would not participate in the listing. This was because of concerns about the company’s drivers’ loose employment contracts, the rising cost of regulation of the gig economy and worries about the firm’s dual share structure, which gives a controlling vote to founder Will Shu for three years.
Hiley warned that senior executives at Deliveroo had been awarded long-term incentives equivalent to 600 per cent of basic pay – one of the highest for a FTSE 100 company.
Deliveroo was set up in 2013 by Will Shu, an ex-Morgan Stanley banker.
He also attacked the way Initial Public Offerings are run and he said the process sidelines independent analysts and lacks transparency.
Hiley said: ‘Had independent firms like us been given proper access to the process at the time, Deliveroo could still have gone ahead, but at a more realistic price level.
‘As it is, what should have been hailed as a success for the London market has turned badly sour. We have been arguing for years that we need to open up the IPO process and allow firms like ours – who have no axe to grind – to provide proper unconnected research. That would do a lot to ensure floats are not overhyped and restore confidence.’
Deliveroo shares fell 3.5 per cent on Friday. Its market capitalisation stands at £4.6billion.
The firm was set up in 2013 by Shu, an ex-Morgan Stanley banker. It lists 45,000 UK restaurants. Last year, turnover grew to £4.1billion from £2.5billion in 2019, but the firm made a loss of £223.7million.
A Deliveroo spokesman said: ‘Will Shu will not be taking a bonus and will not be part of a long-term incentive plan for as long as he is CEO.’
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