Deliveroo, the meal delivery company, has chosen London as the venue for its planned $7bn stock market listing after the government committed to rule changes that will allow founders to keep more control.
Chancellor Rishi Sunak announced the completion of a review of listing rules in Wednesday’s budget that will see some restrictions eased, amid fears that London is lagging behind rivals in attracting stock market flotations.
Deliveroo coordinated its announcement on plans to list in London with the government.
The London-headquartered company has been growing rapidly. In January it raised $180m (£129m) at a $7bn valuation, confirming its status as one of the UK’s leading tech “unicorns” – startups valued at more than a billion dollars. The investment by existing shareholders was led by Durable Capital Partners and Fidelity.
Deliveroo was founded in 2013 by Will Shu, who spotted a gap in the market while working at an investment bank in London.
Deliveroo said it would use a “time-limited dual-class share structure” to give Shu more control, in line with the listing review’s recommendations. That will give him “stability to take decisions to enable the company to execute on its long-term strategic vision in order to create long-term shareholder value”.
The dual-class structure will be limited to three years, after which the company will move to a traditional single-share class structure.
Similar dual-class shareholding structures are already common in the US, particularly in tech companies such as Facebook or Google owner Alphabet, but some governance experts are sceptical of the benefits of different share classes, which can deprive shareholders in the secondary class of control over the company they own.
In the UK, The Hut Group, a founder-led technology and retail company, has been excluded from the main FTSE stock indices because of a similar structure, despite being one of the largest British public companies.
The listing changes have not technically been confirmed yet, and will be subject to consultation by the Financial Conduct Authority, the City regulator. However, they are unlikely to face major difficulties.
Sunak said he wanted to improve the UK’s reputation for hosting stock market listings in light of its departure from the EU’s single market at the start of the year. He said he wanted to “encourage even more high-growth, dynamic businesses to list in the UK” and described Deliveroo as “a true British tech success story”.