PennsylvaniaDeliveroo’s takeover by his American counterpart Doordash is an enlightening example of fortune and different attractions of the American and British stock markets.
Doordash’s offer for Deliveroo is worth the company to 2.9 billion pounds sterling and will create a business with operations in more than 40 countries.
Although both are similar companies, their fortune has diverted considerably in recent years.
The two started as food delivery services offering customers practical and fast access to their favorite restaurants and offering restaurants the possibility of using their kitchens more fully.
The two extended their offers to include other convenience store items – such as layers, flowers and pet food.
The two collected funds by selling stocks to the public in a first public offer (IPO) at about the same time – Deliveroo on the London stock market, Doordash on the New York Stock Exchange.
But when Deliveroo scored his actions in London, Dordash was worth five times more than his British counterpart. Four years later, Doordash was worth 35 times more.
This is not a perfect comparison because Dordash has issued more actions to collect funds to develop over time, which would increase its total value – its market capitalization. But the appetite for the actions of the American company meant that it could succeed in collecting these funds on the American markets.
Let’s look at another measure – the price of each action.
An investor who bought a share of Doordash saw its value increase by 84%.
An investor who bought a share of Deliveroo saw his value drop by 56%.
This means that Doordash is now able to use its greatest financial weight to resume its British rival – just as Deliveroo finally turns a profit.
One of the first donors in Deliveroo, Danny Rimer of index Ventures, told the BBC in 2023 that if he had his time again, he would have voted for an American registration, and that people close to the company agree that the current redemption offer has been partly activated by DOORDASH access to American capital markets.
This is just an example that helps to explain a broader problem. Companies are increasingly avoiding the London stock market in favor of an American rating.
There are several reasons.
Higher evaluation. The 500 largest American companies listed on the stock market (S&P 500) are worth, on average, 28 times the benefit they make in one year. The 100 largest British companies listed on the stock market (the FTSE 100) sell their annual profits 12 times. Less than half.
How can there be such a huge disparity?
Partly because the United States is home to most of the most successful and profitable companies in the world-the so-called magnificent seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla)
Take them out and the actions are negotiated the profits at 20 times-always a massive premium for the United Kingdom.
One of the other reasons why the shift in British assessments is the lack of demand from the old one.
The appetite of British investors for British actions has ratified.
In the past 30 years, the British market share held by British financial institutions has increased from 50% to less than 5%. This is due in part to the fact that financial regulations have encouraged pension funds to buy less risky investments such as state bonds.
But it is also partly because the managers of these pension funds think that they will obtain better returns to invest in the American markets – and they have been dead.
In the past five years only, the total return including dividends on investment in American stocks has been 116% while the same number for the United Kingdom is 45%.
Positive comments
But there are changes in progress.
The so-called “Reforms” of Edinburgh “of the government, designed to make the list in the United Kingdom more attractive, included the reduction in the proportion of a company available for sale to the public and retaining more votes for the founders who wanted to keep business control even if they were selling issues to others.
There have also been positive comments on the attractiveness of the United Kingdom of financial giants like Larry Fink from Blackrock and Jamie Dimon by JP Morgan.
They both noted that the undervalued British looks and that the British market has outperformed the United States so far this year.
The secret that British actions have been cheap have been there for some time. This is precisely why private buyers of the United States and elsewhere have plunged on listed companies in the United Kingdom, which means that they disappear from the British stock market.
Even some of the largest people who remain are considered candidates for a move. Shell’s boss, Wael Sawan, told the BBC that even if he did not intend to move, he and his business “obtained a very warm welcome” when they held their great reception for investors in New York. Shell is negotiated at a discount of 35% compared to its peers listed in the United States and many of its shareholders are not satisfied.
What the Doordash Swoop on Deliveroo seems to highlight once again is that companies listed in the United States can convene greater financial firepower to develop or acquire their rivals.
Deliveroo will join Arm Holdings, Morrisons, CRH Holdings, Ultra, Meggitt and many others as companies that were previously listed on the London Stock Exchange.
Is it important? Pension funds or individual investors can buy shares, whether listed in the United Kingdom, the United States or one of the European exchanges.
But a British announcement generates important auxiliary activities for a British financial services sector which represents even more than 10% of the UK economy and contributes more than 10% of all taxes paid here.
Accountants, lawyers, financial public relations and other companies feed on the costs that the British lists generate.
The trade in the London Stock Exchange is overshadowed by the trade in currencies, bonds and complex contracts, but it has always been a center of gravity for financial activity and which many affirm have lost its power to attract.
