Deliveroo's Prospective IPO

Deliveroo's Prospective IPO

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Discussion

Mr Whippy

28,944 posts

240 months

Friday 2nd April 2021
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Tesla carved a new market without other people’s money.
Then when they got other people’s money the rest of the market started catching up.

hehe

I don’t think we’re too pragmatic in the UK.

It’s easy to enjoy moral hazard when you live on USD.

The UK can’t emulate that.

dirtbiker

1,165 posts

165 months

Wednesday 7th April 2021
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Got my shareholder account details through - £250 currently worth £183.36 - not gone well to be 27% down. Will be interesting to see how it goes!

SarlechS

755 posts

183 months

Wednesday 7th April 2021
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i think it will continue to go down unless they switch up their business model to somehow become more profitable

anonymous-user

53 months

Wednesday 7th April 2021
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SarlechS said:
i think it will continue to go down unless they switch up their business model to somehow become more profitable
Overnight?

Clearly they were just overvalued.

brickwall

5,192 posts

209 months

Wednesday 7th April 2021
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But let’s say a “sensible” company comes to market. Could be any sector, but “Sensible” in that it has (let’s say)
- Profitable with healthy but not insane margins
- Good cash generation
- Consistent growth, probably hit a bit by COVID. Good opportunity for future growth.
- Will no doubt play up any “tech” credentials but there’s probably a fair bit that isn’t tech (which gets transformed over the following years)

Surely this company is FAR more attractive than something like Deliveroo. But would investors pay anywhere near as much? Conventional wisdom would suggest the investors pay 10, 15, maybe 18x EBITDA for the clean company.

There’s a good part of me that thinks the more WeWork and Deliveroo failures we see, the more investors might return to sanity and start paying their top dollar for clean profitable companies (not loss-making moonshots).


hyphen

26,262 posts

89 months

Wednesday 7th April 2021
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George Osborne has announced his engagement to a former aide.

She made £40m last week as an exec at deliveroo, having received shares as part of her salary.

Go George biggrin

Condi

17,089 posts

170 months

Wednesday 7th April 2021
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The Spruce Goose said:
Overnight?

Clearly they were just overvalued.
Despite Goldman (?) buying £75m in the first few days to support the price. Over 50% of the buying activity came from their desks IIRC.

vulture1

12,127 posts

178 months

Wednesday 7th April 2021
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Deliveroo staff have already been striking. They want minimum wage holidays health etc. Well you want all that with the flexibility of working whenever you feel like. The whole point imo is that you do it when it suits you.

This company imo will not do well

anonymous-user

53 months

Wednesday 7th April 2021
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Condi said:
Despite Goldman (?) buying £75m in the first few days to support the price. Over 50% of the buying activity came from their desks IIRC.
isnt 25% down from float price a good indicator of an overpriced offering.

''He said: “Volume is way down and I suspect that any retail selling of the £50m allocation will be soaked up by the banks who have been supporting the price. [It’s] not going back to 390p anytime soon. It will take some blow out numbers for that to happen.”

https://www.telegraph.co.uk/technology/2021/04/07/...

Edited by anonymous-user on Wednesday 7th April 21:39


Edited by anonymous-user on Thursday 8th April 09:08

brickwall

5,192 posts

209 months

Wednesday 7th April 2021
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hyphen said:
George Osborne has announced his engagement to a former aide.

She made £40m last week as an exec at deliveroo, having received shares as part of her salary.

Go George biggrin
I call bullst on this.

£40m at £2.80 a share is 0.75% of the total market cap of the company.

I sincerely doubt that they would hand out that kind of equity to a head of public policy joining in 2017, when the company was already valued at c.£1bn. Especially when the Founder CEO only owns c.6%.

No doubt the salary/bonus will be healthy, but I suspect the equity would be more like 0.1% - which would still be a compelling offer (“hey if we reach our target valuation of £7bn you’ll make £7m in 4 years, on top of your salary”).

With the share price/valuation at £5.5bn, 0.1% means £5m. But
a) Only 20% of the company is floated so far
b) Management will have lock-ins on their shares

I’d be amazed if she’s taken more than £1m out of the IPO.
(and bloody right too - half the reason this IPO flopped was because of a lack of investor confidence in their public/social contribution, and associated policy risk)

DonkeyApple

54,931 posts

168 months

Thursday 8th April 2021
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It's a tech company with infinite growth potential or it's a service business built upon an ability to operate below minimum wage and to get others to pay for the equipment and has seen peak customer demand in 2020.

Somewhere between the two extremes is the reality that will eventually determine if this is an Ocado or an Aston Martin. What we can be relatively comfortable with is that it's not joining any FAANG related fund index next week and not is it joining any yield focussed fund. It is a non tech company that is going to continue to try and exist under some form of modern tech funding model until it either implodes, staggers into some form of actual profitability, gets taken out or stumbles randomly into some miracle new enterprise.

I'm still intrigued as to how this business is losing so much money. I'll admit to not bothering to exactly go looking so don't know whether it's expansion and market share costs or whether it's a fundamental problem with their business model? A decade ago take aways ran their own delivery operations and remained profitable, Deliveroo has taken over that business in exchange for up to 35% of the customer payment while also pushing the infrastructure costs onto the delivery rider. Add in the far greater efficiencies to enable a greater number of deliveries per hour and you have to ask how they have taken a business that was hideously inefficient yet profitable and turned it into one that is super efficient yet loss making?

Is it as simple as having to accept vast amounts of loss making, small orders that take aways traditionally rejected and the customers had to collect themselves in order to have a large enough network of riders? Or is it that they can't charge the restaurants enough due to competition from each other? Or is all the delivery business profitable but vast sums are being spent on carving out market share?

If the latter then it seems unlikely that the IPO would have been so desperately rushed to the point of being done at a terrible time or that it would have been so lacklustre?

Maybe the industry solution lies in accepting that old Mr Chan and Mr Patel and their lack of formal education, ignorance of tech and their natty collection of moth eaten tank tops, ill fitting trousers and beards were not only decades ahead of modern MBA programmed individuals with their wardrobes but also in terms of understanding their business and quite possibly with a better understanding of tax avoidance. biggrin. If the industry accepts that profitability lies in telling customers who want a 99p cheeseburger to get on their own bike and come and get it then maybe thatbis the eventual answer. Maybe to keep being able to service minimum ticket orders they will create a network of localised customer collection hubs where the riders drop off multiple orders simultaneously to a fixed and known location and the end customer has to go back in time to collecting a cheap order or throwing in a bigger order to get it brought to the door?

In fact, isn't the key to incentivise the evening hot supper customer to also buy and have delivered at the same time their cold lunch for tomorrow? That way you make two sales for one delivery? Maybe their solution is that simple? To upsell tomorrow's cold lunch as part of the previous day's supper delivery?

brickwall

5,192 posts

209 months

Thursday 8th April 2021
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DonkeyApple said:
Is it as simple as having to accept vast amounts of loss making, small orders that take aways traditionally rejected and the customers had to collect themselves in order to have a large enough network of riders? Or is it that they can't charge the restaurants enough due to competition from each other? Or is all the delivery business profitable but vast sums are being spent on carving out market share?
It’s a combination of the above.
- They are throwing incentives at customers, riders, and restaurants to use the Deliveroo platform. A stand-alone order “pre incentives” will be profitable, but the incentives push it into the red.
- They have massive central overheads to run a big business and push for growth. They’re stacked full of ex top-tier consultants, bankers, and software developers (not to mention former political advisors) etc. These people do not come cheap.

The open questions are:
- Do those incentives actually grab share that will turn profitable once you remove it? I.e., is there sufficient customer demand at an un-discounted price, and sufficient rider/restaurant supply at an un-subsidised price to have a matching equilibrium? Or do the customers/riders/restaurants merely walk away when the incentives are removed?
- Can Deliveroo ever get sufficient scale and middle-man margin to justify the high central overheads?

(My hypothesis is no on both counts)

hyphen

26,262 posts

89 months

Thursday 8th April 2021
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I used Just Eat yesterday, and one interesting thing is that unlike uber & deliveroo, Justeat are only doing food deliveries.

No cornershops, supermarkets or anything else. Just takeaways.

okgo

37,860 posts

197 months

Thursday 8th April 2021
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Yet they're offering free delivery on much lower tariff orders, peculiar.

Condi

17,089 posts

170 months

Thursday 8th April 2021
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Given the ruling that Uber's drivers are employees and thus entitled to holiday pay, minimum wage etc, then how is Deliveroo different?

Once they have to pay people properly their costs will be much too high for the business to work, you cant pay someone £10 per hour, plus holiday plus pension plus sick pay to deliver 3 takeaway orders. Simply doesn't add up.

speedy_thrills

7,760 posts

242 months

Friday 16th April 2021
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I've used this service a lot over the last couple of weeks because they give you £10 off any order over £15 for new customers. I've just been singing up for new accounts every time to take advantage of the discount as a "new" customer.

Thanks Deliveroo shareholders. thumbup

hyphen

26,262 posts

89 months

Friday 16th April 2021
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speedy_thrills said:
I've used this service a lot over the last couple of weeks because they give you £10 off any order over £15 for new customers. I've just been singing up for new accounts every time to take advantage of the discount as a "new" customer.

Thanks Deliveroo shareholders. thumbup
Do you have a plentiful supply of pay and go sims? Aa would seem incompetent for deliveroo to allow it.

NickCQ

5,392 posts

95 months

Friday 16th April 2021
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hyphen said:
Do you have a plentiful supply of pay and go sims? Aa would seem incompetent for deliveroo to allow it.
OCG member spotted!

DonkeyApple

54,931 posts

168 months

Friday 16th April 2021
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NickCQ said:
hyphen said:
Do you have a plentiful supply of pay and go sims? Aa would seem incompetent for deliveroo to allow it.
OCG member spotted!
Burners to scoop Deliveroo offers is how it starts. Before you know it you're importing half a tonne of coke every week and offing coppers. biggrin

Greshamst

2,028 posts

119 months

Friday 16th April 2021
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DonkeyApple said:
NickCQ said:
hyphen said:
Do you have a plentiful supply of pay and go sims? Aa would seem incompetent for deliveroo to allow it.
OCG member spotted!
Burners to scoop Deliveroo offers is how it starts. Before you know it you're importing half a tonne of coke every week and offing coppers. biggrin
Now you didn't float up the Lagan in a bubble son!