It’s not a good week to be a side dish in the food delivery room.
After baking the delivery platform No. 2 England, Deliveroo in it public debut on the London stock exchange on Wednesday, investors moved to scorch US middlemen. Both can leave lasting burns in the sector.
Back in December, it seemed that investors were coveting food delivery stocks with almost as much vigor as vaccines. Now that the shoot has emerged, investors’ tastes appear to have changed. US market leader DoorDash shares close 86% above their public offering price on their first day of trading late last year, but it has been down nearly 30% in the months since restaurants started welcoming indoor dining again.
DoorDash, at least, still boasts a monster market value of over $ 50 billion on a fully diluted basis, nearly 8.5 times the size of its closest US pure game competitor. Other companies in this sector that have gone public recently have not been that lucky. Olo’s software-as-a-service platform, which counts shipping platforms as both a competitor and a customer, has seen its stock drop 24% since its public offering less than two weeks ago. Meanwhile, the eagerly awaited public offering for London-based food delivery platform Deliveroo closed 26% below its offering price on Wednesday.
It seems that investors’ appetite for food delivery can be spoiled by a story – like food – with a little hair on it. Even though revenues increased 54% last year amid the pandemic, Deliveroo has still managed to lose money, even based on adjusted earnings before interest, taxes, depreciation and amortization. Now, future profitability is even more questionable after Uber Technologies recently lost a UK court case that resulted in a reclassify the landmark from its ride-hailing driver as workers, entitling them to benefits such as vacation pay and a pension. The decision has left skeptics worried that food delivery drivers will be next on the regulatory menu. For Deliveroo, which accounts for roughly half of its sales in the UK, that would be very expensive.