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Instead the stock-market debut of Deliveroo Holdings Plc, an eight-year-old business backed by none other than Amazon.com Inc (NASDAQ:AMZN)., flopped Wednesday in a sharp blow to the City’s latest ambitions.
A more than 30% slump following the initial public offering was caused by concerns over labor practices, as well as a recent drop in investor appetite for the technology sector. The company’s decision to have a dual-class structure, which gives outsized voting rights for its founder Will Shu, didn’t help, and was criticized by Legal & General Investment Management, the U.K.’s biggest asset manager.
The washout has dented London’s efforts to cast itself as a high-growth listings hub, casting a shadow over a record first quarter for IPOs and proposed changes to make the U.K. more attractive for tech offerings. So far, the City has been losing unicorns to New York’s deeper pool of investors.
If the U.K. doesn’t change how it perceives businesses that are not yet profitable, it “will keep losing valuable businesses to the U.S. – and along with it the investment, the intellectual capital and wider growth of the ecosystem,” said Manish Madhvani, managing partner of GP Bullhound LLP, a tech investment firm.
Deliveroo’s IPO Debacle Is a Bad Look for London: Alex Webb
Tech founders generally prefer listing in the U.S. due to rules that give them greater control over their companies even after they’ve gone public. To level the playing field, the U.K. is looking at allowing dual-class structures on the premium listing segment of the London Stock Exchange, where they are currently prohibited.
But dual-class shares remain a contentious issue in London. Large money managers have pushed back against the structure, saying it runs afoul of corporate governance norms.
The U.K. is also losing startups to deep-pocketed U.S. special purpose acquisition vehicles. Arrival Ltd., a London-based maker of electric vans and buses that counts BlackRock Inc (NYSE:BLK). among its biggest investors, started trading in New York last week after combining with a blank-check firm. Cazoo Ltd. said earlier this week it will list in the U.S. after selling itself to hedge-fund founder Dan Och’s SPAC in a deal valued at $7 billion, turning its back on a potential IPO in London.
All is not lost. Some large deals are waiting in the wings. DNA sequencing firm Oxford Nanopore Technologies Ltd, another homegrown U.K. unicorn, on Tuesday said it plans to list in the City in the second half of the year.
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