Food delivery firm Gousto plunged into governance storm after slashing valuation
Gousto, the food delivery service backed by Joe Wicks, the celebrity fitness instructor, has become embroiled in a bitter corporate governance row after excluding long-standing investors from a deeply discounted share sale.
Sky News can exclusively reveal that Gousto slashed its valuation from $1.7bn (£1.4bn) just over a year ago to less than $300m (£250m) last month when it secured £50m of new funding from some of its biggest shareholders.
The fall in valuation represented a cut of about 80% in 13 months, according to insiders.
Gousto has also secured another £20m in debt financing as part of its efforts to shore up its balance sheet, according to insiders.
While steeply discounted capital-raisings have become commonplace during the technology downturn of the past year, Gousto’s decision to shun investors holding just under 10% of its shares has sparked uproar.
The row has prompted several smaller shareholders to lodge complaints with the company’s board, which is independently chaired by Katherine Garrett-Cox, the former Alliance Trust chief executive.
Ms Garrett-Cox was hired in 2021 to bolster Gousto’s corporate governance standards as it seemingly headed towards a stock market flotation.
The meal-kit delivery company was founded in 2012 by Timo Boldt and James Carter, two former investment bankers, with the former winning the accountancy firm EY’s prestigious Entrepreneur of the Year award in 2022.
Mr Boldt quit his job at the age of 26 to set up the company.
Gousto sells subscriptions to recipe boxes and markets itself as offering healthy meals at value-for-money prices, with Mr Boldt describing the company’s ambition to become “the UK’s most-loved way to eat dinner”.
It has attained B Corporation status, which is awarded to businesses with strong ethical or environmental credentials.
Katherine Garrett-Cox was hired in 2021 to bolster Gousto’s corporate governance standards
One investor questioned whether its B Corp certification was in keeping with its treatment of small shareholders, some of whom have backed Gousto since its earliest days.
A $150m fundraising in January 2022, led by the giant SoftBank Vision Fund 2, cemented the company’s “unicorn” status – referring to start-ups worth $1bn or more – and paved the way for some investors to reduce their holdings in a separate secondary share sale.
The SoftBank fund is not thought to have participated in the latest capital-raise.
It invested at a significant premium to the valuation that saw Gousto become a unicorn in November 2020, meaning it is now sitting on a huge paper loss on its stake.
Gousto’s other major shareholders include Unilever’s ventures arm, Fidelity International, the railways pension scheme Railpen and Grosvenor Food & AgTech, an arm of the Duke of Westminster’s vast business portfolio.
A number of institutions which are not currently shareholders in Gousto were, however, also approached about the so-called open offer of shares, according to one insider.
‘Something has gone wrong in the last year’
The decision to gauge the appetite of a number of prospective new investors has further angered the existing shareholders who were excluded from the process.
One investor said this weekend: “Gousto is a great business and Timo has been a great founder/CEO, but clearly something has gone wrong in the last year, and people don’t see the company taking action to resolve this.
“And then the company and big shareholders do this significantly discounted fundraise as an ‘open’ offer but does not offer it to all shareholders.
“Why would the board vote not to offer to all shareholders and why would these big funds treat their fellow investors like this? Are they doing this across all their investments?”
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A spokesman for Gousto declined to answer questions about the capital-raise other than insisting that the open offer had been extended to over 90% of the company’s investor base.
Volatile economic conditions
The row at Gousto raises wider questions about shareholder rights at large private companies, particularly those which have gone through multiple rounds of funding.
While Gousto is not in any immediate financial difficulty, it told shareholders that the latest £50m was designed to steer it through more volatile economic conditions.
The governance row in which it has become embroiled has also prompted questions about the role of Ms Garrett-Cox and Gousto’s other independent board members.
Workforce slashed
The former Alliance Trust chief was forced out of that post following a battle with the activist fund Elliott Advisors.
This weekend, Ms Garrett-Cox declined a request to speak to Sky News.
Sky News revealed last month that the company had slashed its workforce by 14% and taken an axe to its ambitious hiring plans.
A person close to Gousto said the redundancy round equated to fewer than 100 employees, implying that its announcement in 2020 that it would create 1,000 new jobs by the end of 2022 had failed to bear fruit.
The job cuts reflected the chill in investor and management sentiment towards technology-focused companies’ growth prospects in 2023, even as economic data suggests that any UK recession may be shallower than feared.
Surge in demand during pandemic
Prior to the latest funding round, Gousto secured $150m of new capital in January 2022, which was followed weeks later by a $230m secondary share placing.
It benefited from a surge in demand during the pandemic, and had said it aimed to double its workforce to 2,000 and open two further distribution warehouses.
In its 2020 financial year, Gousto saw revenue more than double to £189m, up from £83m during the prior 12 months.
It also reported underlying earnings before interest, tax, depreciation, and amortisation in 2020 of £18.2m, against a loss of £9m in 2019.
Bankers at Rothschild were retained some time ago to work on a flotation, although that is now unlikely to take place for several years.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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