The market emphatically endorsed my negative opinion of the Deliveroo share offer, which bombed from its offer price of 390p to close at 282p before Easter. The biggest London IPO since the commodity giant Glencore went public in 2011 now also stands as the most embarrassing flop in living City memory. Goldman Sachs and JP Morgan Cazenove, the deal’s bookrunners, must have known it was in jeopardy when they knocked more than a billion off their first indicative valuation after UK institutional investors lined up to say they wouldn’t touch it.
But 70,000 Deliveroo app users, having failed to read that signal, bought into the ‘community offer’ — and have lost an average of £200 each. The whole thing stinks like a left-behind prawn bhuna and it will be scant consolation if the banks involved are denied the £18 million of ‘additional commission’ payable at Deliveroo’s discretion had all gone according to plan.
As for the London Stock Exchange’s self-reinvention as the go-to bourse for hot tech stocks on this side of the Atlantic, I’m afraid it’s back to the drawing board — urgently so, as the prospects of EU market access for UK financial services continue to recede.
Another aspect of Deliveroo that institutions didn’t like is its dual share structure, which gives founder Will Shu 57 per cent of the voting rights on his residual 6 per cent holding of ‘Class B’ shares: the sort of device Lord Hill’s recent ‘UK Listing Review’ said London should accommodate ‘to make sure we attract companies in vital innovative growth sectors’. But far from being an exciting novelty, the dual structure is seen by some City elders as a return to notions of corporate control from half a century ago, when family-held multiple-voting B shares protected underperformers like the Savoy hotel from takeover. Perhaps the Deliveroo fiasco will prove salutary, however. Overall, I’m in tune with veteran fund manager Richard Buxton of Jupiter Asset Manager, who declared himself ‘absolutely delighted… If this convinces all those IPOs seeking silly valuations to go to New York, Hong Kong or Amsterdam, not London, so much the better’.
The first business headline after the Easter break was the sudden departure of two senior executives from Credit Suisse, which has compounded its loss-making entanglement with Greensill Capital by dropping an estimated $3-4 billion in the collapse of Archegos Capital Management, a New York-based ‘family office’. Archegos founder Bill Hwang had previously settled with US regulators after pleading guilty to insider trading at the hedge fund Tiger Asia Management, but that evidently didn’t deter Credit Suisse, Nomura of Japan and several other investment banks from queuing up to provide the facilities he needed to build his new business.
In particular, they sold him derivatives contracts representing huge leveraged bets on tech stocks such as ViacomCBS in the US and Baidu and Tencent in China — amounting, sources say, to more than $50 billion of exposure. It seems no bank and certainly no regulator had a full picture of what Hwang was up to, but his fate was sealed after Archegos defaulted on margin calls on some contracts, and banks began selling off large blocks of the underlying shares.
Last month, I pondered what wider troubles might emerge from the ‘shadow banking’ world of Greensill, where the media has so far focused more on the whiff around David Cameron’s involvement than on possible domino financial damage. Now the spotlight turns to secretive family investment offices, of which (according to a report by Insead) there are more than 7,000 around the world, managing $6 trillion of assets — making them substantially bigger than the more visible hedge fund sector. The FTquotes a US regulator who thinks family offices have the potential to ‘wreak havoc on our financial markets’. Are we watching ripples in the money pond that might turn into the next tsunami?
The next goal
Denise Coates, co-founder and chief executive of the online sports betting site Bet365, has been hailed here as a heroine of modern capitalism, and I have only a little moral difficulty in saluting her again for taking home £469 million in salary and dividends last year, making her the world’s highest-paid woman — despite a 75 per cent fall in her company’s operating profits. Denise and her brother John created Bet365 out of their father Peter’s local bookie chain; in doing so, they created thousands of jobs in their depressed home town of Stoke-on-Trent — where they also support local charities, subsidise Stoke City football club and pay more than enough tax to fund the NHS for the whole of Staffordshire. Denise herself lives relatively modestly and avoids the media.
So — apart from the fact that the £7 billion Coates stash has been accumulated by making it easy for punters to place losing ‘in-play’ bets on live sports events — what’s to criticise? Luke Hildyard of the High Pay Centre says it’s ‘appallingly inefficient’ for individuals to ‘hoard wealth’ in this way when ‘more progressive’ policies on tax and profit sharing could re-direct it to improve public services and raise living standards for lower earners. But the simple fact is that Bet365 is a legit business in a regulated sector — and a decent employer, with 469 new jobs created last year and no furlough grants taken; the owners are entitled to distribute its rewards as they choose.
The real test is what — in frippery, philanthropy or bold investment — they do next with their fortune. Among fellow self-made billionaires, for example, Sir James Dyson is now our biggest, most hi-tech farmer and Sir Jim Ratcliffe is busy reviving the classic Land Rover Defender as his 4×4 Grenadier. An obvious diversification for the Coateses, in the era of ‘global Britain’, would be to revive Stoke’s former status as supplier of fine crockery to the world: appetites for betting on the next goal must surely fade, but we’ll always need plates to eat off.
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