Amazon-backed Deliveroo reveals it lost $309 million in 2020 ahead of IPO

Deliveroo, the Amazon-backed food delivery service, has revealed that it recorded a loss of £223.7 million ($309 million) last year in plans to float on the London Stock Exchange that were published Monday.

Deliveroo’s losses are substantially less than they were in 2019, when the London-headquartered firm recorded a loss of £317 million. While the eight-year-old company is still in the red, its revenues climbed to £4.1 billion in 2020, up from £2.5 billion in 2019.

A date for Deliveroo’s initial public offering has not been officially announced but it is likely to be in the next few weeks. Goldman Sachs and JP Morgan Cazenove have been appointed as the joint global coordinators.

Deliveroo could be valued at around $10 billion in the stock market listing, according to reports. It recently raised $180 million in fresh funding giving it a $7 billion valuation. Alongside Amazon, Deliveroo is also backed by Durable Capital Partners, Fidelity, T. Rowe Price, General Catalyst, Index Ventures and Accel.

In the company’s “Expected Intention To Float” filing published on Monday, Deliveroo CEO Will Shu said that he “never set out to be a founder or a CEO” and that he “didn’t read TechCrunch.”

“I’m not one of those Silicon Valley types with a million ideas,” said the former Morgan Stanley analyst in a letter included in the filing. “I had one idea. One idea born out of personal frustration. An idea that I was fanatically obsessed with: I wanted to get great food delivered from amazing London restaurants.”

Fight for survival

Deliveroo went from near failure in 2020 amid a competition review into Amazon’s minority investment, to operating profitability toward the end of the year thanks to the coronavirus lockdown-driven surge in demand for online takeout services.

Today Deliveroo claims to have over 115,000 food merchants and 100,000 restaurants and millions of consumers across 12 countries. The filing shows that six million orders are made on Deliveroo every month.

But Deliveroo is “still getting started,” according to Shu.

“Our ambitions have increased as we start to truly understand and execute on the opportunity in front of us in online food,” he said.

More power for Shu

The filing includes details on Deliveroo’s dual-class share structure, which will see Shu get 20 votes per share, while all other shareholders will only be entitled to one vote per share.

This structure, which will give Shu enhanced voting rights and more control over the direction of the company, will be in place for three years.

It comes after a government-backed review called for reforms to London’s listing regime, including the ability to list dual-class shares which were pioneered by Google and Facebook.

Deliveroo is planning to reserve £50 million worth of shares for customers across the U.K..

“We are proud to be enabling our customers to participate in a future float and have the chance to buy shares,” said Shu. “Your loyalty and custom has helped build our business. I want you to have a chance to share in our future.”

Deliveroo said it will use the proceeds from the IPO to enhance its app, expand its delivery-only “Editions” kitchens, and push deeper into on-demand grocery deliveries, which are currently offered by supermarkets like Waitrose, Co-op, Londis, Aldi and Carrefour.

Deliveroo is also planning to give £16 million to its riders through a new “Thank You Fund,” with a handful of loyal riders to be given payouts of £10,000. Others will receive £1,000, £500, £200, or £100, depending on how many orders they have delivered. The average payout will be £440.

Over the years, some of the firm’s riders have complained about how much they’re paid by Deliveroo and campaigned to be classed as workers instead of contractors, making them eligible for things like sick pay and holidays.

Amazon’s Deliveroo bet

Amazon backed Deliveroo in May 2019, leading a $575 million funding round in exchange for a 16% stake in the business.

In July 2019, the U.K.’s antitrust regulator, the Competition and Markets Authority, argued that Deliveroo’s cash injection from Amazon could reduce competition by removing the possibility of the e-commerce giant re-entering the market, while Deliveroo could “cease to be distinct.” It froze the investment for almost a year while it investigated.

To the disappointment of rivals Just Eat and Domino’s Pizza, the deal was approved by the CMA in August after Deliveroo said it could go out of business without the capital.

(CNBC)