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InPost listing delivers €2.8bn present for Advent

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For four years’ work, it was not a bad result. In 2017, Advent bought Polish parcel locker operator InPost and its main shareholder Integer in deals valuing the pair’s equity at 430m zlotys (€102m).

On Wednesday the private equity group and two small co-investors sold 35 per cent of InPost for €2.8bn as it debuted in Amsterdam in Europe’s biggest listing so far this year.

The sale is the latest sign of investor hunger for ecommerce stocks as the pandemic drives an ever larger share of shopping online.

Even before the deal was priced, three big investors — BlackRock, Capital World Investors and Singapore’s GIC — committed to buy €1.03bn worth of shares. On Monday, InPost shortened the offer period and brought the listing forward by two days because of what it said was “significant investor demand”.

But besides looking for bright spots in the pandemic-stricken economy, the investors who drove InPost’s market capitalisation up 15 per cent to €9.2bn on the first day of trading are making a longer-term bet that it can shake up the way that online purchases find their way to customers’ homes after lockdowns have eased.

At the moment, delivery of those goods relies heavily on courier services. InPost offers an alternative: a network of automated lockers — which the company dubs automatic parcel machines (APMs) — dotted around towns and cities where customers can pick up purchases more or less at their convenience, rather than waiting for a courier to arrive.

Column chart of Revenues (bn zloty) showing Sales at InPost increase sharply

In Poland, 49 per cent of the population already lives within a 7-minute walk of one of InPost’s lockers and its app has 5.6m users. The group now plans to expand its model elsewhere in Europe.

“Five to seven years from now, my feeling is that door-to-door deliveries are going to be 40 per cent of the market or less,” said Rafal Brzoska, InPost’s chief executive and founder, who retains a 12 per cent stake in the business. He argued that the remaining 60 per cent — the “current, old-fashioned set-up” of people collecting from stores or post offices — “needs automation and will be automated with APMs”.

The group’s goal is to capture at least half the total market in Poland. “It will be a long journey to have a big share of the out-of-home market in other geographies [but] our ambition is always to get to the best-in-class model we have created in Poland,” he said.

InPost’s position in Poland has been built up substantially under Advent, which will retain at least a 40 per cent stake in the business. Since 2017, its web of APMs in Poland has more than quadrupled to 10,776 and it plans to roll out up to 5,000 more this year.

Net profit jumped sharply during the pandemic from 50.8m zlotys (€11.2m) in 2019 to 208.7m zlotys (€45.9m) in the first nine months of 2020.

One of the main challenges now will be to diversify its business, both at home and abroad. In the first nine months of 2020, 99.4 per cent of InPost’s revenues came from Poland. Almost half came from sales made through Allegro, the dominant Polish ecommerce website, which last year became the country’s largest listed company after launching on the Warsaw stock exchange in the country’s biggest ever IPO.

Column chart of Number (000) showing Pandemic boosts demand for InPost's automated parcel machines

“There is a high concentration of revenues,” said Konrad Ksiezopolski, head of CEE equity research at Haitong Bank in Warsaw. “The brutal truth is that Allegro dominates the Polish ecommerce market, so that structure of revenues . . . comes from the structure of the market.”

Adam Aleksandrowicz, InPost’s chief financial officer, said that the high share of sales coming from Allegro cut both ways, pointing out that 70 per cent of Allegro’s “last mile” volumes were delivered via InPost. “You might turn the question around and say: how dependent are Allegro on us?” he said.

Still, in an effort to defray the risks associated with having one big client, InPost last year signed a deal with Allegro that commits the ecommerce site to supplying InPost with a minimum parcel volume for at least four and a half years. It has also sought to build ties with other ecommerce groups, and expects to start catering for products sold via Amazon later this year.

Foreign expansion will bring further diversification. Mr Brzoska said that InPost would add 2,000 APMs in the UK this year — currently its main overseas market — to almost treble its network there.

The group also intends to expand into Italy, France and Spain, three of Europe’s biggest ecommerce markets, which he described as “almost white space” and thus offered favourable conditions for InPost to enter.

Even as it expands abroad, however, InPost is facing greater challenges on its home turf. Amazon said on Wednesday that it would launch a Polish website and speculation is rife that it and other ecommerce groups, such as Allegro, AliExpress and postal group Poczta Polska, could set up locker networks of their own.

“Currently, none of these players is a threat to InPost. The problem for the company will be when the combined infrastructure of the competitors begins to match that created by InPost,” said Karol Tokarczyk, digital economy analyst at Polityka Insight in Warsaw. “[Then] the quality of service and the pace of parcel delivery will also be important.”

Despite the resources that groups such as Amazon could mobilise, Mr Brzoska insisted that the US giant’s entry into the Polish market did not have to spell trouble for InPost.

“Once [Amazon] start promoting their own APMs, the advocacy for APMs will increase massively,” he said. “[And] the rest of the market, the non-Amazon-related market, will start searching for an agnostic solution: and here we are.”



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Deliveroo picks London for IPO after listings review

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Deliveroo has chosen London for its highly anticipated initial public offering after Rishi Sunak, the UK chancellor, endorsed an overhaul of listing rules to allow founders to retain more control after going public. 

The multibillion-pound IPO is expected to be among London’s largest this year, handing the City a much-needed win over New York and Amsterdam at a time of feverish activity in new tech listings. 

“Deliveroo is proud to be a British company, and the selection of London as its home for any future listing reflects Deliveroo’s continued commitment to the UK,” said Claudia Arney, Deliveroo’s chair. 

Deliveroo’s decision follows the publication on Wednesday of a review by Lord Jonathan Hill, former EU financial services commissioner, which recommended a wide range of reforms to loosen listing rules in the UK. 

Among Hill’s recommendations were proposals to allow dual-class share structures, which allow founders to hold on to extra voting rights after an IPO, to be used by companies trading on the London Stock Exchange’s “premium” segment. The dual-class arrangement is popular in Silicon Valley, where it is used by companies including Facebook and Google parent Alphabet. 

The move, which Sunak endorsed during Wednesday’s Budget, was designed to attract fast-growing tech companies such as Deliveroo, though some London fund managers fear the change puts shareholder protection at risk.

Deliveroo said in a statement on Thursday morning that its dual-class structure would be “closely in line” with the Hill review’s recommendations and be limited to three years. However, the changes are unlikely to come into force before it has completed its IPO, with initial paperwork expected to be filed as soon as next week.

Companies with dual-class structures can already trade on the LSE’s standard listing. Once the new rules are in place, Deliveroo would be able to move up to a premium listing. A person close to the company said that the Hill review was also likely to attract more tech companies to London, making it more attractive as a listing venue overall.

“Alongside the dual-class share structure, Deliveroo intends to have a strong commitment to corporate governance standards including a majority independent board of directors as well as upholding diversity standards,” the company said. 

Will Shu, Deliveroo’s co-founder and chief executive, said he was “proud and excited” to list in London, where the company first began making restaurant deliveries in 2013. 

Sunak hailed the decision as “fantastic”. 

“Deliveroo has created thousands of jobs and is a true British tech success story,” he said in a statement. “It is great news that the next stage of their growth will be on the public markets in the UK.”

Arney added: “London is not just where Deliveroo was born, it is one of the leading capital markets in the world, with an incredible technology ecosystem, sophisticated investment community and a skilled talent pool. The time-limited dual-class structure would provide Will and his team with the certainty needed to execute against their ambitious growth plan to become the definitive online food company.”



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Investors push back against UK listings overhaul

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London’s biggest fund managers have pushed back against proposals to liberalise the City’s stock market listings regime, saying changes aimed at luring in technology businesses and special purpose acquisition companies risk “watering down” investor protections.

A report by Lord Jonathan Hill, published on Wednesday, recommended allowing dual-class share structures for companies admitted to the London Stock Exchange’s “premium” segment, and lowering the limit on the free float of shares in public hands from 25 per cent to 15 per cent, meaning founders need to sell less of their business to list it. He also laid out proposals to make the UK a stronger potential venue for listings of blank-cheque companies known as Spacs.

UK companies and the country’s main listings venues, the LSE and Aquis Exchange, said the plans were vital to improving London’s attractions in a globally competitive market. But some investors are nervous.

Chris Cummings, chief executive of the Investment Association, the trade body that represents asset managers with a total of £8.5tn in assets, said the proposals were an “important first step”, but he warned that the UK needed to ensure “appropriate investor protections for minority shareholders”.

One large investor in UK-listed companies said it was strongly opposed “to the watering down of rules governing premium listing”. “Shareholder protections should not be used as a bargaining chip to prove the UK is open for business,” the investor said.

Another large global asset manager said the current standards for premium listings, including the principle of “one share, one vote”, were “critical”.

“The UK has gold standards for stewardship,” the fund manager said. “If we are going to create more flexibility for a listing, we would want over time [for companies to] work towards a premium listing with ‘one share, one vote’ and standard free float with sufficient liquidity.”

Some asset managers took a more upbeat view of the Hill review.

“Schroders is in full support of Lord Hill’s review. It is crucial that we do all we can to make the UK the most attractive place for companies to list and to do business for the benefit of investors,” said Peter Harrison, chief executive at Schroders, the biggest listed UK fund manager.

Hill’s proposals are intended to boost London’s global standing as an equity market, which has weakened in recent years as the US and Hong Kong have swept up the majority of in-demand tech listings. New York’s markets have also gained a boost from a wave of Spacs, which raise money from investors and list on a stock market, then look for an acquisition target to take public.

The departure of some large technology stocks such as Arm in recent years has cemented the blue-chip FTSE 100 index’s bias towards financials, energy and mining stocks. A loss of trading businesses to European rivals since Brexit has also further dulled the allure of the City.

The Hill recommendations are “smart, pragmatic measures”, added Sir Martin Sorrell, whose S4Capital digital market and advertising business has a dual-class share structure. “[It] also signals that the government’s ‘Singapore on Thames’ vision for a post-Brexit Britain is on the way to becoming a reality,” he said.

Makram Azar, chief executive of Golden Falcon, the European technology blank cheque company that opted to list in New York, said London needed to make significant structural changes.

“The recommendations will no doubt spur investors to look at listings on the LSE in the future. It will take time to develop the whole ecosystem around Spac listings in London, but this is the start of the sea change that’s needed.”

Others cautioned against the risks of making changes to attract blank cheque companies.

“Spac deals may be booming in the USA right now, but fear of missing out is just about the worst possible reason for making any investment decision,” said Russ Mould, investment director at stockbroker AJ Bell. “It is therefore to be hoped that the FCA maintains its critical faculties when it assesses Lord Hill’s proposals and the safeguards that he offers alongside them.”



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Oscar Health raises $1.4bn from stock market listing

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Oscar Health, the health insurance company co-founded by Joshua Kushner, raised more than $1bn in an initial public offering that topped the company’s marketed price range, in a sign of investor confidence despite political uncertainty over the future of US healthcare.

The New York-based company priced its shares at $39 each on Tuesday, according to a statement, raising about $1.4bn. Oscar would have a market capitalisation of $7.9bn at that price, based on the total number of shares outstanding.

Oscar previously said it expected its listing share price to range from $32-$34 before increasing the range to $36-$38 on Tuesday. Coatue Management, Dragoneer Investment Group and Tiger Global Management — existing investors in the company — had indicated interest in purchasing up to $375m of shares in the offering.

The move demonstrated that investors are relatively unfazed by potential headwinds for the company. President Joe Biden has vowed to reform the US healthcare system and the Supreme Court is considering a decision on the fate of the Affordable Care Act, known as Obamacare, both of which could pose significant challenges to Oscar’s operating model.

Oscar was co-founded in 2012 by Mario Schlosser and Joshua Kushner, the brother of Jared Kushner, Donald Trump’s son-in-law. Kushner’s venture firm, Thrive Capital, owned a stake that would be worth $1.3bn at the offering price and give it 75.9 per cent of the company’s voting power.

Oscar, which bills itself as the first health insurance company “built around a full stack technology platform”, has more than half a million paying members and offers its insurance plans in 18 US states.

But the company has struggled to become profitable. In 2020, it recorded widening losses of more than $400m on revenues of about $460m, a decline from almost $490m of revenues the previous year.

Oscar’s IPO came on the heels of several other public market debuts for “insurtech” groups in the past year, which fuelled an already strong run of stock market listings.

Clover Health, which uses data analytics to connect senior citizens to Medicare Advantage plans, merged with a special purpose acquisition company, or Spac, sponsored by former Facebook executive Chamath Palihapitiya in a $3.75bn deal in October. Lemonade, which sells rental, homeowners and pet health insurance, went public last summer in what turned out to be one of the year’s most successful stock market debuts.

Oscar is highly sensitive to any changes to Obamacare, which lawmakers have wrestled over since it was written into law in 2010. Almost all of the company’s revenue comes from plans subject to Affordable Care Act regulations, according to its prospectus.

President Joe Biden’s healthcare programme would leave Obamacare largely intact, but would make some adjustments and add a public option for all Americans. The Supreme Court, meanwhile, is expected to announce a decision on yet another review of the Affordable Care Act in the coming months.

Goldman Sachs, Morgan Stanley and Allen & Co led the offering.



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