Deliveroo’s German rival Delivery Hero has purchased a five per cent stake in the company, sending its shares to their highest level since it went public earlier this year.
Deliveroo’s shares shot up as much as 10 per cent to 360p in morning trading, although they still remained below the 390p they were listed at in March.
Delivery Hero, which does not operate in the UK, said it had been building equity in Deliveroo since April.
Its chief executive Niklas Östberg, said that he believed Deliveroo’s stock was “undervalued” since its disastrous IPO which saw its shares drop 26 per cent.
“We acquired our stake at an average (enterprise value) of c. £3.6 billion for a business with £6.6 billion (gross transaction volume) runrate in Q1 (£7.0 billion in Q2) at decent Gross Profit margin,” Östberg said.
“We considered all possible scenarios back in April when we start acquiring our stake. In no scenario would this be a bad investment long term.”
Despite this, analysts remained largely unclear about why the investment had been made.
Jefferies said it was “hard to say with conviction at this point what Delivery Hero’s intention is”.
One of the key reasons behind Deliveroo’s difficult IPO was its founder Will Shu’s decision to list with a dual-class share structure, which essentially gives him the power to block any takeover attempt for three years.
This means that Delivery Hero, which operates in 50 countries and is valued at around four times that of Deliveroo, will not be considering a takeover anytime soon.
Deliveroo’s shares have recovered by around 15 per cent in recent months, in part due to it raising its growth forecast in July.