The acquisition of Deliveroo by DoorDash, its American counterpart, serves as a stark illustration of the contrasting fortunes and appeal of the US and UK stock markets. With a valuation of £2.9bn, DoorDash’s bid for Deliveroo will result in the formation of a company with a presence in over 40 countries. Despite both companies starting out as similar food delivery services, their trajectories have significantly diverged in recent years as they expanded their offerings to include a wider range of convenience products.
While Deliveroo made its debut on the London stock market, DoorDash opted for the New York Stock Exchange. The disparity in their valuations became glaringly apparent post-listing, with DoorDash surpassing Deliveroo by a substantial margin. Over the years, DoorDash’s market capitalization has soared, positioning it as a formidable contender for taking over its UK-based competitor, Deliveroo. Notably, Deliveroo has started to turn a profit, prompting reflections on the choice of listing location.
The comparison between DoorDash and Deliveroo also sheds light on a broader trend of companies favoring US listings over UK ones. The higher valuations of US companies, driven by the success of tech giants like Alphabet, Amazon, and Apple, contribute to this shift. Furthermore, the diminishing appetite for UK stocks among domestic investors accentuates the allure of US markets. The disparity in returns on US and UK shares over the past few years further underscores the attractiveness of American listings.
Despite the appeal of US listings, efforts are being made in the UK to enhance the attractiveness of local listings. The government’s Edinburgh Reforms, aimed at making UK listings more appealing, have garnered positive feedback from prominent financial figures. While the UK’s undervalued market presents an opportunity for investors, the trend of UK-listed companies being acquired by foreign buyers remains a concern. As companies like Deliveroo transition to being US-listed entities, the implications for the UK financial services industry and broader economy come into focus
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