UPDATE 3-Deliveroo dives 30% as debut of the decade turns torrid

(Adds company comment, trader comment, graphic)

By Abhinav Ramnarayan and Julien Ponthus

LONDON, March 30 (Reuters) - Shares in Deliveroo
plunged by as much as 30% in their trading debut on Wednesday,
slicing more than 2 billion pounds off the company's valuation
in a blow to the food delivery group and the London market for
initial public offerings (IPO).

The highly-anticipated listing, the biggest in the London
market in a decade, had been hailed by British finance minister
Rishi Sunak as a "true British tech success story" that could
clear the way for more IPOs by fast-growing technology
companies.

But the debut had already been overshadowed as some of
Britain's biggest investment companies shunned the listing,
citing concerns about gig-economy working conditions and the
share structure.

The 390 pence price tag gave an overall valuation of 7.6
billion pounds ($10.46 billion) and was already set at the
bottom of an initial range.

Within minutes of the market opening on Wednesday, it lost
2.28 billion pounds of its value, which one senior equity
capital markets banker said would hurt the market for initial
public offerings in Britain and Europe.

"It's an extremely painful move on one of the most
anticipated IPOs of the year," he said, asking to remain
anonymous.

Having hit a low of 271 pence, the stock was back up to 298
pence by 1015 BST.

Shares often recover from steep falls on their market debuts
as the managing banks make use of the over-allotment, or
greenshoe - a percentage of the offer reserved to stabilise the
price.

One trader said he had seen no buyers for the stock. "All
we’ve seen is one-way traffic, not a single buyer," he told
Reuters on condition of anonymity.

A source familiar with the deal said it was a rough start,
but the company would have to focus on the long term.

"Deliveroo has raised 1 billion of new capital today which
they are going to invest in the business and new technologies.
It is not about the share price on a single day."

PANDEMIC BOOM

Deliveroo's self-employed drivers have seen a boom in demand
during the COVID-19 pandemic, bringing food from
otherwise-shuttered restaurants to housebound customers.

But the Amazon-backed company has been running at a hefty
loss; it said it narrowed an underlying loss to 223.7 million
pounds ($308.93 million), from 317.3 million pounds in 2019.

Irrespective of profitability, there has been a clamour for
growth companies over the last year as the COVID-19 crisis has
sunk rates and government bond yields to all-time lows.

But with U.S. Treasury yields rising, this trade has lost
allure and many tech stocks on both sides of the Atlantic have
fallen in recent weeks, leading to questions over inflated
valuations.

"That comes back to the issue that how could a company that
was valued at 3 billion (pounds) in November, 5 billion in
January, be magically worth 8-9 billion in March - particularly
when according to its own statements it was potentially in need
of emergency funding last year," Russ Mould, Investment Director
at AJ Bell, said.

The listing of the London-based company, founded by boss
William Shu in 2013, is London's biggest IPO since Glencore's in
May 2011 and also the biggest tech float yet on the London Stock
Exchange.

The heavyweight investors that stayed away included Aberdeen
Standard Life, Aviva, Legal & General Investment Management and
M&G.

"The number of institutions lining up to say no on ESG
(environmental, social and corporate governance) grounds always
looked like it was going to make it a tricky debut," said James
Athey, investment director at Aberdeen Standard Investments.
(Reporting by Abhinav Ramnarayan and Julien Ponthus; Additional
reporting by Elizabeth Howcroft and Tom Arnold
Editing by Rachel Armstrong and Barbara Lewis)