If the delivery as a service model was unprofitable at the height of a global pandemic when it was a necessity how does this business model ever achieve profitability.
A charitable theory would be that a large amount of their stock comes from restaurants, many of which (but obviously not all) were closed, as opposed to takeaways, which largely continued operating as normal.
I really hate the idea of using a food delivery app to promote a complicated financial product.
Retail investors will only be able to purchase IPO shares through the app after making a purchase through deliveroo so maybe they are just trying to use this as a small promotional tool for the app.
Equity is one of the most complicated (and easiest to mislead buyers with) financial product out there?
Are the books cooked? Who knows. What are the share classes, and how do they relate to each other? Who knows. What are the bylaws, and how is board composition determined? Who knows.
All of these are huge. People get misled by far simpler products (like loans) all the time, let alone something like this.
Usually when people talk about "complicated financial products" they mean some kind of derivative.
Yes, you can cook the books. That doesn't make the product complex.
It is fair to point out that some tech IPOs (We work comes to mind) had pretty sketchy corporate structuring and stock classes.
But I don't think there's any simpler financial product than equity.
You can do the same kind of financial engineering with bonds. Do you really know what's in the covenant? Is there even a covenant to speak of? People have been getting burnt for decades now by companies finding creative ways to separate the collateral from the loan.
How's this different to brewdog selling shares to its customers?
They've been doing that for years, you get a free beer on your birthday, etc.
Been successful for them and their customers.
Wouldn't be too surprised if they directly inspired deliveroo to do the same, that someone in Deliveroo's UK head office is a brewdog shareholder and suggested it off the back of that. They seem to be trying to build a similar kind of brand.
You got me so excited. But then reading through the fine print, I realized my excitement is about three months too late.
> Therefore, subject to the following paragraph, the Offer will be closed in all of the Approved Jurisdictions, except for the United Kingdom, on and from 10:59 p.m. (GMT) on 31 December 2020 ("EU Closing Date").
One needs to reside in US, AU, UK, Ireland or Spain? to be able to participate.
Deliveroo is one of prime examples what's wrong with gig economy and why it should be heavily regulated. Same as Doordash, they're disastrous for local food business'
I don’t get this level of cynicism. Like they’re a delivery company. People give them monies for someone to deliver food, restaurants give them monies for lead generation and delivery, both parties are happy enough with the transaction to actually do it. Yeah they’re middlemen squeezing customers, drivers, and restaurants but that’s basically all business.
I really enjoy using these services. I went from having pizza and American-Chinese food delivery to having every restaurant in a 15 mile radius. It’s so nice when I’m low energy, having people over, whatever to order better food than chain pizza.
The service in itself is alright, but the 35% cut Deliveroo and Uber Eats take is just too much.
It's a very inefficient business. My orders are very often wrong, and they simply refund the whole order. Then the next time I order they get it wrong again and I get refunded again. With Just Eat or direct restaurant delivery, the issue would get resolved on the spot.
There's just no need for such a fat middleman between restaurants and customers. The only reason I'm using it is to exploit the delivery mispricing and promotions, like Uber in its early days.
Obv question: why doesn't someone undercut them if they are making rents? What's the barrier to entry? My local coffee shop does its own delivery. Seems to work. Is it network effects?
> both parties are happy enough with the transaction to actually do it
That part often isn't true. These companies frequently list restaurants with whom they have no relationship, and when a person makes an order on-line, they just send a driver with a credit card to purchase it takeout and pick it up. It sounds fine on first look, but the way it plays out, this causes huge brand management issues for the restaurants. Customers are charged more than they expect, not realizing delivery company is misrepresenting prices, and complain about delivery problems (which are frequent) to the restaurant, despite that restaurant having nothing to do with delivery, and often no knowledge of it. Sometimes there are even darker shenanigans happening. GrubHub replacing restaurant phone numbers with their own comes to mind.
All this is done to collect/encourage usage data, and then offer the restaurant a formal relationship, in a form of borderline extortion. And as owners of ever growing network/distribution channel, these companies can very much force businesses into accepting very unfavorable deals. They don't care if they're burning these restaurants to the ground, because there will always be more. They make money off the churn.
Don't get me wrong, I like being able to order from a wide variety of restaurants using the same, streamlined interface. But after learning how bad a deal these companies are to the restaurants, I steer away from those platforms. I don't like when multinational corporations are using their weight and dishonest tactics to crush the small entrepreneurs from the community I live in.
> These companies frequently list restaurants with whom they have no relationship, and when a person makes an order on-line, they just send a driver with a credit card to purchase it takeout and pick it up.
Deliveroo has increased sales of local food businesses. E.g. they "boosted the industry's revenue by £460 million in the year to June 2017." [1]
This is not too difficult to believe and to guess the mechanism at play: Before Deliveroo (and similar) services many local restaurants could only be reached by actually visiting them and eating them. Now they can reach people who want to eat at home (and who previously could only order from some pizza/kebab places that were the only ones to deliver). Therefore, all in all, I can believe that they made people order more than before and effectively consume more restaurant food than before. For my household that has certainly been the case.
> Before Deliveroo (and similar) services many local restaurants could only be reached by actually visiting them and eating them.
The counterpoint to this is that one of the more profitable parts of Deliveroo's business is to do away with these local restaurants entirely in favour of ghost kitchens (which Deliver refers to as "Deliveroo Editions").
So Deliveroo enters a marketplace, sees which local restaurants are doing a brisk trade, and brings in a ghost kitchen that they own and operate (with the higher margins that cutting out an additional party entails).
And to the end user - yourself - this can be very hard to determine, and you can believe yourself to be supporting a local eatery when in fact you're not. In some regards this is not dissimilar to Amazon's approach (find out what third party products are selling well, release their own version and undercut).
Ghost kitchens are a good way for restaurant chains to expand by opening these types of kitchens for delivery only instead of having to open a full-blown restaurant at a premium.
For customers it does not matter that their Nando's (just an example, I don't know if Nando's do ghost kitchens) comes from a Nando's full restaurant or a Nando's ghost kitchen. It's exactly the same food and it creates the same number of jobs for people working in kitchens...
It's not Deliveroo that can decide that "Oh, Nando's do a good business here so let's create a fake one by ourselves...".
Now, on the other hand for independent restaurants Deliveroo (and other similar services obviously) can be a good way to expand their customers base by offering delivery without having to invest in the infrastructure.
Ghost kitchens can serve multiple restaurants simultaneously (as they do for the hipster food vans), and with a delivery service, they allow to decouple food brand from food production. Two vans or "restaurants" (brands) operating off the same ghost kitchen will need less cooks than if these two vans/brands made their own food separately.
Ghost kitchens are good at mass-producing generic undifferentiated dishes. If you crave “California roll sushi” or “some kind of vegetarian pizza”, ghost kitchen would work, but so would a grocery store takeout section.
Any restaurant that went through the effort of distinguishing themselves and specializing in a few signature dishes is unlikely to be threatened by ghost kitchens.
Smells like it, they probably want to GME themselves.
I remember reading someone's opinion how the current SV companies are basically ponzi schemes (e.g. WeWork), the big institutional investors hype them up and get the first stocks, retail investors would come in next, and the big institutions can then cash out. I wish I can remember where I read this...
I have read this too a long time ago, and it always struck me as true. That's why I stopped wanting to invest in new IPOs. You're not "getting in on the ground floor" with them, they're usually for sale a few months after the IPO. Look at SNOW and ABNB for recent examples or GPRO for one from a while ago.
No, they are clearly not, and that's a very strong accusation to wantonly throw around. It's a 7.5 billion dollar IPO, this represents less than one percent of that.
This kind of offering is only a very small step above a straight up ponzi scheme. We are at the top of the bubble and no one knows what to do with their dollars that are rapidly losing value. Order your shitty fast food and get a discount on your shitty stock.
The UK government must be more careful with inflation than the US government because the pound is not a serious reserve currency used across the world as the US dollar is. That said, the UK government has borrowed significantly to pay for coronavirus relief programs.
Remember that humans can actually reproduce rapidly to introduce workable productivity many times over in a lifetime if needed. We are in a bubble of luxuriance.
This is based on the narrative that IPOs are systematically underpriced and those able to participate walk away with gains as a rule. If IPOs are actually accurately priced or overpriced, then this doesn’t benefit customers in any way.
With that in mind it seems much more likely to me this is just a way to push the stock.
Retail trading is booming [1]. I hope this leads to financial literacy and more people benefiting from democratic ownership of capital (more profits going to worker class).
> This is based on the narrative that IPOs are systematically underpriced
IPO's that are systematically underpriced are the ones that aren't available to the general public (i.e., an allocation offering for private, accredited investors).
It is likely that any IPO allocation available to the public is not underpriced, but at most priced correctly, and usually more likely to be over-priced!
Like many others, I don't think this is a particularly smart idea for investors. If you think the company is worth investing in then invest. If you want take-away tonight order take-away. There is no reasont to conflate those two decisions.
This does remind me of the Burrito Bond though - I used to eat at Chillango whilst they were trying to get people to buy their burrito bond, and always found it hilarious - lending money to a retail restaurant chain always seemed like an absurdly high risk low reward choice. Administrators are now offering those bond holders 10pence on the pound.
Seems a lot like a scam being dressed up as "innovation"
43 comments
[ 5.0 ms ] story [ 81.9 ms ] threadRetail investors will only be able to purchase IPO shares through the app after making a purchase through deliveroo so maybe they are just trying to use this as a small promotional tool for the app.
Are the books cooked? Who knows. What are the share classes, and how do they relate to each other? Who knows. What are the bylaws, and how is board composition determined? Who knows.
All of these are huge. People get misled by far simpler products (like loans) all the time, let alone something like this.
Yes, you can cook the books. That doesn't make the product complex.
It is fair to point out that some tech IPOs (We work comes to mind) had pretty sketchy corporate structuring and stock classes.
But I don't think there's any simpler financial product than equity.
You can do the same kind of financial engineering with bonds. Do you really know what's in the covenant? Is there even a covenant to speak of? People have been getting burnt for decades now by companies finding creative ways to separate the collateral from the loan.
They've been doing that for years, you get a free beer on your birthday, etc.
Been successful for them and their customers.
Wouldn't be too surprised if they directly inspired deliveroo to do the same, that someone in Deliveroo's UK head office is a brewdog shareholder and suggested it off the back of that. They seem to be trying to build a similar kind of brand.
> Therefore, subject to the following paragraph, the Offer will be closed in all of the Approved Jurisdictions, except for the United Kingdom, on and from 10:59 p.m. (GMT) on 31 December 2020 ("EU Closing Date").
One needs to reside in US, AU, UK, Ireland or Spain? to be able to participate.
I really enjoy using these services. I went from having pizza and American-Chinese food delivery to having every restaurant in a 15 mile radius. It’s so nice when I’m low energy, having people over, whatever to order better food than chain pizza.
It's a very inefficient business. My orders are very often wrong, and they simply refund the whole order. Then the next time I order they get it wrong again and I get refunded again. With Just Eat or direct restaurant delivery, the issue would get resolved on the spot.
There's just no need for such a fat middleman between restaurants and customers. The only reason I'm using it is to exploit the delivery mispricing and promotions, like Uber in its early days.
That part often isn't true. These companies frequently list restaurants with whom they have no relationship, and when a person makes an order on-line, they just send a driver with a credit card to purchase it takeout and pick it up. It sounds fine on first look, but the way it plays out, this causes huge brand management issues for the restaurants. Customers are charged more than they expect, not realizing delivery company is misrepresenting prices, and complain about delivery problems (which are frequent) to the restaurant, despite that restaurant having nothing to do with delivery, and often no knowledge of it. Sometimes there are even darker shenanigans happening. GrubHub replacing restaurant phone numbers with their own comes to mind.
All this is done to collect/encourage usage data, and then offer the restaurant a formal relationship, in a form of borderline extortion. And as owners of ever growing network/distribution channel, these companies can very much force businesses into accepting very unfavorable deals. They don't care if they're burning these restaurants to the ground, because there will always be more. They make money off the churn.
Don't get me wrong, I like being able to order from a wide variety of restaurants using the same, streamlined interface. But after learning how bad a deal these companies are to the restaurants, I steer away from those platforms. I don't like when multinational corporations are using their weight and dishonest tactics to crush the small entrepreneurs from the community I live in.
This is scummy, but Deliveroo doesn't do that.
This is not too difficult to believe and to guess the mechanism at play: Before Deliveroo (and similar) services many local restaurants could only be reached by actually visiting them and eating them. Now they can reach people who want to eat at home (and who previously could only order from some pizza/kebab places that were the only ones to deliver). Therefore, all in all, I can believe that they made people order more than before and effectively consume more restaurant food than before. For my household that has certainly been the case.
[1] https://en.wikipedia.org/wiki/Deliveroo
The counterpoint to this is that one of the more profitable parts of Deliveroo's business is to do away with these local restaurants entirely in favour of ghost kitchens (which Deliver refers to as "Deliveroo Editions").
So Deliveroo enters a marketplace, sees which local restaurants are doing a brisk trade, and brings in a ghost kitchen that they own and operate (with the higher margins that cutting out an additional party entails).
And to the end user - yourself - this can be very hard to determine, and you can believe yourself to be supporting a local eatery when in fact you're not. In some regards this is not dissimilar to Amazon's approach (find out what third party products are selling well, release their own version and undercut).
Ghost kitchens are a good way for restaurant chains to expand by opening these types of kitchens for delivery only instead of having to open a full-blown restaurant at a premium.
For customers it does not matter that their Nando's (just an example, I don't know if Nando's do ghost kitchens) comes from a Nando's full restaurant or a Nando's ghost kitchen. It's exactly the same food and it creates the same number of jobs for people working in kitchens...
It's not Deliveroo that can decide that "Oh, Nando's do a good business here so let's create a fake one by ourselves...".
Now, on the other hand for independent restaurants Deliveroo (and other similar services obviously) can be a good way to expand their customers base by offering delivery without having to invest in the infrastructure.
Any restaurant that went through the effort of distinguishing themselves and specializing in a few signature dishes is unlikely to be threatened by ghost kitchens.
I remember reading someone's opinion how the current SV companies are basically ponzi schemes (e.g. WeWork), the big institutional investors hype them up and get the first stocks, retail investors would come in next, and the big institutions can then cash out. I wish I can remember where I read this...
With that in mind it seems much more likely to me this is just a way to push the stock.
Retail trading is booming [1]. I hope this leads to financial literacy and more people benefiting from democratic ownership of capital (more profits going to worker class).
https://finance.yahoo.com/news/retail-investor-stock-market-...
IPO's that are systematically underpriced are the ones that aren't available to the general public (i.e., an allocation offering for private, accredited investors).
It is likely that any IPO allocation available to the public is not underpriced, but at most priced correctly, and usually more likely to be over-priced!
This does remind me of the Burrito Bond though - I used to eat at Chillango whilst they were trying to get people to buy their burrito bond, and always found it hilarious - lending money to a retail restaurant chain always seemed like an absurdly high risk low reward choice. Administrators are now offering those bond holders 10pence on the pound.
Seems a lot like a scam being dressed up as "innovation"