Goldman Sachs Expands Deliveroo Buy To Boost IPO

Goldman Sachs spent £75 million ($104 million) to buy additional Deliveroo shares in an effort to support the initial public offering (IPO) price after a disappointing debut on the London Stock Exchange (LSE), the Financial Times reported, citing sources.

The underwriter’s buy was almost 25 percent of the value of shares moved during Deliveroo‘s first two days of trading last week, according to Bloomberg data, per FT. Trading volume was about one-third of what Deliveroo’s advisers had anticipated. 

Goldman’s purchase, plus the overallotment option for price stabilization, would have given the world’s second-largest investment bank a profit on Deliveroo’s dropping share price. However, an agreement not disclosed in the original IPO filings would turn the profit over to the London food delivery startup.

Financial advisers earned roughly £49 million in fees from Deliveroo. Aside from Goldman Sachs — the only stabilization agent on the deal — other participants included J.P. Morgan, Bank of America, Citigroup, Jefferies and Numis.

Deliveroo’s listing in London had been eagerly anticipated and was anticipated to be the biggest in the U.K. in 10 years. Some hoped that having a technology platform like Deliveroo on the London exchange would set off a chain reaction of tech startups looking to list. Some fear that its poor debut could send tech companies to list in New York or Amsterdam instead, per FT.

Amazon-backed Deliveroo saw its share price slide 30 percent on its first day of trading on March 31 before inching back up a bit. Overall, it closed out its first day on the LSE down 26 percent and saw about $1 billion in valuation swiped. Some analysts believe that proposed regulatory changes in the U.K.’s gig economy could have been one of the main reasons investors went soft on the debut. The changes could affect the startup’s ability to turn a profit. For example, per a U.K. Supreme Court decision, 70,000 U.K. gig workers at Uber were reclassified as employees, which means they get a guaranteed minimum wage and benefits. Deliveroo could end up in the same position, some investors feared.