Deliveroo, backed by Inc., set a price range for its planned London listing with an upward valuation of $12 billion, posing a test for continued investor appetite in online food-delivery services.

In December, U.S. peer DoorDash Inc. priced its initial public offering at $102 a share, easily surpassing the San Francisco company’s expected price range of $90-$95. Part of that enthusiasm was due to the explosion of home delivery brought about by the coronavirus pandemic. But as vaccinations increase in many rich countries, including the U.S. and Deliveroo’s home market of the U.K., it is unclear how sustainable delivery growth will be if people start to flock back to restaurants.

Deliveroo’s backers think there is still room to grow. Earlier this month, Deliveroo’s IPO was expected to value the company at around $10 billion, according to people familiar with the matter. Deliveroo has opted for a dual-class share structure that gives CEO and founder Will Shu enhanced voting rights. Shu will get 20 votes per share while other investors are entitled to only one. Deliveroo hopes to raise gross proceeds of £1 billion from its IPO.

“We are proud to be listing in London, the city where Deliveroo started,” Shu said in a statement Monday. “Becoming a public company will enable us to continue to invest in innovation, developing new tech tools to support restaurants and grocers, providing riders with more work and extending choice for consumers, bringing them the food they love from more restaurants than ever before.”

Deliveroo says it will use the IPO proceeds to enhance its platform and push deeper into on-demand grocery deliveries, which have benefited heavily from the coronavirus pandemic. In a trading update Monday, Deliveroo said the total value of transactions it processes more than doubled in the first two months of the year, getting a boost from the U.K.’s coronavirus lockdown. Volumes grew by 130% year-on-year in the U.K. and Ireland while other markets grew 112%.

Deliveroo went from near failure in 2020 amid a competition review into Amazon’s minority investment in the firm, to operating profitability toward the end of the year thanks to the pandemic-driven surge in demand for online takeout apps. “We have seen a strong start to 2021 and we are only at the start of an exciting journey in a large, fast-growing online food delivery market, with a huge opportunity ahead,” said Shu.

Todd Horwitz Chief Strategist
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