Deliveroo shares slide as rival firm sells stake in the food delivery company

30 January 2024 , 14:45

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Deliveroo has seen shares fall after a rival sold its stake in the business (Image: PA Wire/PA Images)

Deliveroo's stocks took a dip as Delivery Hero, a German food delivery competitor, declared its intentions of selling their stake in the company.

This came amidst ongoing sluggishness in the food delivery market. On Monday, Delivery Hero stated it would let go of almost 68.2 million Deliveroo shares, equating to an around 4.5% stake. The sale could be around £83 million based on yesterdays closing share price and will essentially erode Delivery Hero's investment in the UK firm.

Analysts have said the move might lead to consolidation within the European food delivery market. The decision comes just before the expiry of Deliveroo's dual-class shares, granting founder and CEO Will Shu extended voting rights and protection against hostile takeovers.

There is some speculation that Deliveroo could become a takeover target once this share structure expires. Shore Capital analysts said: "A large part of the European food delivery market debate has been around consolidation, with the key catalyst for Deliveroo being April, when its CEO's golden shares expire."

"We have argued for some time that M&A (merger and acquisition) risk has been helpful in-part to the valuation multiple premium versus peers."

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"Delivery Hero, in our view, was one of the more plausible potential acquirers of Deliveroo, despite their balance sheet headaches, so them selling down takes a key horse out of the race and is a slight blow to the bull case."

Delivery Hero initially bought this share in Deliveroo back in August 2021 during the height of the pandemic when the demand was high. However, with life returning to normal and people opting for restaurants and shopping, there has been increased pressure on these rapid delivery companies. Deliveroo has yet to comment on the matter.

Tuesday morning saw Deliveroo shares take a 4.3% dip.

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Lawrence Matheson