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When asked whether the unsuccessful stock market debut of the food delivery service Deliveroo embarrassed him, Finance Minister Rishi Sunak was very relaxed.

"My goodness, no ... share prices are going up, they are going down," said Sunak, referring to what a shaky start to Facebook when it was listed in 2012.

Deliveroo, recently praised by Sunak as a “real British success story”, more than wobbled when it was first listed on Wednesday.

Slumped by 30 percent in the first few minutes of trading, the first day ended with a minus of 26 percent.

There were also no signs of recovery on Thursday.

In the morning the course crumbled by another percent.

The disappointing start is bitter for the financial center of London.

Deliveroo, with a market capitalization at the start of 7.6 billion pounds (8.9 billion euros) the largest IPO since the commodities expert Glencore ten years ago, should be the prelude to a firework of IPOs in the city.

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The easing of the stock exchange regulations that Sunak had presented at the beginning of March should ensure that young companies with growth prospects no longer give preference to New York or Amsterdam.

Deliveroo had already been celebrated as the start of a tech boom on the Thames.

Instead, the hoped-for showcase project has become an “absolute disaster,” the Financial Times quoted a banker as saying.

“It's totally embarrassing.

I can't remember anything like this happening before. ”For London's hope of becoming the center of tech IPOs, this is“ devastating ”.

Thin margins could continue to melt

Analysts identified a number of reasons for the weak debut.

First there was the concern of institutional investors that Deliveroo would have to improve its labor rights.

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"The flexible employment model of the Deliveroo couriers is a key pillar of the company's success strategy," said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

"If the company were forced to switch to more traditional social benefits, such as pension insurance, the already thin margins could hardly improve and the path to profitability would be really very difficult."

The bike and moped couriers who deliver pizza, curry or Chinese Xiaolongbao for Deliveroo are self-employed.

This has the advantage that they can determine their working hours very flexibly, argues Deliveroo.

But in Great Britain the Supreme Court recently granted additional rights to the previously self-employed drivers of the taxi service Uber.

The labor law in the country differentiates between workers and employees, "workers" and "employees".

According to the judges, the Uber drivers are "workers" and are therefore entitled to vacation pay and pension payments.

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It remains to be seen whether the status of the 100,000 Deliveroo couriers will stand up to judicial review.

In some markets, such as Italy, there are already processes pending on the labor law situation.

In addition, according to investigative research, drivers are poorly paid.

A third does not meet the statutory minimum wage.

Some only get a meager two pounds an hour.

Dangerous structure of the IPO

Several large fund companies, among other things, had stated in advance, with reference to these regulatory risks, that they would not be part of the IPO.

Legal and General Investment Managers (LGIM), the largest asset manager in the country, also included M&G, Aberdeen Standard Investments and Aviva Investors.

In addition, according to statements by portfolio managers, institutional investors have also struggled with the structure of the IPO, which is closely related to hopes that London will become more attractive.

Deliveroo has issued two categories of shares, thus ensuring that CEO and co-founder Will Shu has a disproportionately high level of influence.

With a share of around 500 million pounds, he has more than 50 percent of the voting rights.

Not only is his position at the top incontestable, he would also have the opportunity to block strategic decisions such as takeovers on his own.

Companies with such “dual class shares” are currently not included in the stock exchange indices, regardless of their market capitalization.

But the restructuring announced by Sunak should change that in order to make the location attractive to tech companies with strong founders.

Institutional investors, on the other hand, fear that the softening of the rules will have fewer opportunities to push for responsible corporate governance.

Passive asset managers who track an index then have to invest in the companies.

"It is important to protect minority shareholders against potential bad management behavior that could lead to the destruction of company values ​​and price losses," said an LGIM spokesman in the days leading up to the IPO.

Bitter slump for private investors

Goldman Sachs and JP Morgan, the two banks that are accompanying Deliveroo on the IPO, have also made mistakes, according to analysts.

On the one hand, the timing of March 31st was chosen poorly.

On the last day of the quarter, institutional risk would be shy as many clarify their positions quarterly.

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After all, they would have exceeded the price.

"Even at the lower end of the issuance range, Deliveroo has been paying too high a price for a delivery platform that is losing money in a highly competitive environment and whose path to profitability is questionable," said Neil Wilson, an analyst at Markets.com.

"The books were drawn, it was simply miscalculated."

Deliveroo is still not writing a profit to this day, although orders via the platform have skyrocketed by two-thirds last year thanks to the restrictions imposed by the pandemic.

With Uber Eats and Just Eat, Deliveroo also has to compete with two major competitors.

The slump is bitter for private investors, who have been allocated paper worth 50 million pounds (59 million euros).

Unrestricted trading will not start until next Wednesday, April 7th.

At this point at the earliest, they can part with their shares.

Analysts agree that London's attraction for first-time listings is likely to have suffered a severe blow.

Perhaps the problem is more fundamental.

According to Alex Chesterman, founder of Cazoo, a British used car sales platform that went public in New York this week, the British simply lack the “psyche” for tech IPOs.

US investors would understand much better why it pays to invest for future growth.