You are here: Home - Investing - Experienced Investor - News -

Investors show a lacklustre appetite for Deliveroo shares

0
Written by: Emma Lunn
31/03/2021
Shares in the food delivery company have had a turbulent start on the London Stock Exchange.

Deliveroo shares opened at 331p, down from the 390p which investors paid for the company in its initial public offering (IPO). But shares fell to as low as 271p in early dealing.

Deliveroo had already cut its top-end valuation by £1bn before the shares went on sale.

The news comes as thousands of Deliveroo customers received notification of their allocation of shares in the company’s ‘community offer’.

Retail investors won’t be able to trade their shares until 7 April when the IPO becomes ‘unconditional’. Shares are currently in a period called ‘conditional trading’ which is not open to individual investors due to different market rules.

Deliveroo is unusual in being one of only a very few IPOs open to retail investors. The fall in value of Deliveroo shares is in contrast to many primary listings which experience a ‘first day pop’ when shares immediately increase in value from the issue price.

According to AJ Bell, the average increase between issue and opening price is 12% – a £1,200 profit on an investment of £10,000.

Online card store Moonpig saw a 25.7% difference between the issue price and the opening price, while The Hut Group saw a 20% jump.

But first day flops include The Barkby Group which lost 11.7%, Ferro-Alloy Resources which was down 8.6%, and Aston Martin Lagonda which fell 4.5% on its first day of trading.

Lee Wild, head of equity strategy at Interactive Investor, said: “It’s been a disastrous stock market debut for Deliveroo after a cool reaction from the City. The run-up to Deliveroo’s stock market debut has been marred by criticism of the company’s treatment of delivery riders, and by doubts among many top fund managers who chose not to invest in the flotation.

“IPOs typically rise in value when they begin trading publicly, which has attracted criticism from retail investors and investment platforms, including Interactive Investor. But preparations for this float have not been ideal, and there were several clear warning signs that all was not well.

“Firstly, the company doesn’t make a profit, even though the pandemic provided the biggest tailwind it could hope for. That benefit will fade as lockdowns end and diners return to pubs and restaurants over the summer. Remember, too, that Deliveroo had to be bailed out by Amazon last year, and it continues to operate in a highly competitive market.

“Most recently, several major City investors, including Aviva and Aberdeen Standard, opted out of the hotly anticipated IPO citing ESG concerns related to the company’s treatment of its employees. They’re also turned off by founder and chief executive Will Shu who still has over 50% of shareholder voting rights.

“It is also worth remembering that Deliveroo can cancel the IPO at any time until 7 April. That’s because the shares are currently trading conditionally – what’s called a ‘when issued’ basis. It is highly unlikely this will happen, but it’s worth pointing out.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week