* Banker blames shift from COVID plays to recovery plays
* Amsterdam stock market hits high, led by tech stocks
* Markets platform says worst one-day performance for big
IPO
(Adds details on share structure)
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 Britain's ambitions to attract fast-growing tech
companies to the London market.
The highly-anticipated listing, the biggest on the London
market in a decade, had been hailed by finance minister Rishi
Sunak as a "true British tech success story" that could clear
the way for more initial public offerings (IPO) by 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.
Deliveroo founder Will Shu is retaining his 6.3% stake, but
will have 57.5% of the voting rights of the company for three
years; a structure that meant the company could not obtain a
premium listing that gives companies access to the main FTSE
indices.
The 390 pence price tag gave an overall valuation of 7.6
billion pounds ($10.46 billion) at the bottom of a target range.
Within minutes of the market opening on Wednesday, it lost
2.28 billion pounds of its value, which equity capital markets
bankers said could undermine the market for some IPOs in Britain
and Europe.
Fabian de Smet, head of investment banking at Berenberg,
called it a "sector problem".
"Investors are turning away from the work-at-home play and
putting their money into the economic recovery play. Deliveroo
got caught in the middle of a huge rotation. It was the last IPO
of the old COVID world," he said.
Having hit a low of 271 pence, the stock recovered to 292
pence by 1415 GMT. It was still down 25%, making it the worst
first-day performance for a sizeable London IPO - above 1
billion pounds - on record, markets platform Dealogic said.
Shares often rebound during 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.
Deliveroo customers, who were allocated 50 million pounds of
shares, are only able to trade on April 7, when unconditional
trading begins.
AMSTERDAM HIGH
The stock's fall follows a poor run for many growth stocks.
Its main peers Just Eat Takeaway.com and Delivery Hero
have fallen around 12% each in the past month.
U.S. peer Doordash - which doubled in value on its stock
market debut last year - has fallen as much as 40% over the last
month.
But those stocks have steadied in the last two sessions, and
the Amsterdam stock exchange hit a record high on Wednesday, led
by tech stocks.
PANDEMIC BOOM
Deliveroo's self-employed drivers have seen a boom in demand
during the pandemic, bringing food from otherwise-shuttered
restaurants to house-bound 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
pushed interest 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 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.
Goldman Sachs and JP Morgan are leading the deal, while Bank
of America, Citi, Jefferies and Numis are also part of the
syndicate of banks managing the transaction.
(Reporting by Abhinav Ramnarayan and Julien Ponthus; Additional
reporting by Arno Schuetze, Elizabeth Howcroft and Tom Arnold,
Graphic by Dhara Ranasinghe
Editing by Rachel Armstrong and Barbara Lewis)
Glencore (GLEN)
Aviva (AV.)