By Geoffrey Smith
Investing.com -- Shares in Deliveroo (LON:ROO) slumped on their debut on the London Stock Exchange, as concerns about governance and profitability overshadowed the biggest IPO of the year so far in Europe.
By 5:05 AM ET (0905 GMT), Deliveroo shares were quoted at 305 pence, some 22% below their IPO price. The shares were priced at the bottom of their marketing range, at 390p, after a number of high-profile U.K. institutions chose not to subscribe.
A recent Supreme Court decision forcing ride-hailing company Uber (NYSE:UBER) to treat its gig-economy drivers as workers has cast doubt over Deliveroo's own path to profitability, given that it, too, depends on a legion of low-paid contract riders and drivers.
The IPO pricing had valued Deliveroo at 7.6 billion pounds ($10.5 billion). As such, the initial drop of 30% wiped over 2 billion pounds off its valuation.
In addition to concerns about its exposure to labor regulation risk, there have also been concerns about the company's dual-class share structure, which leaves founder Will Shu in majority control of the company despite owning less than 10% of all shares outstanding. The model has been common in the U.S. and has encouraged many tech firms to go public without subjecting their founders' vision to short-term pressure from outside shareholders. Critics say it amplifies "key person risk", while the institutional investors that avoided the IPO have said that it reduces their scope to exert influence on management to address their ESG-related worries.