A Deliveroo courier travels along Regent Street, delivering dining in central London during Covid-19 Tier 4 restrictions.
Pietro Recchia | Images SOUP | LightRocket via Getty Images
LONDON – Amazon Deliveroo-backed food delivery company shares rose about 3% on Wednesday morning, while retail investors began trading the company’s shares for the first time.
The company’s share price rose from £ 2.80 ($ 3.86) to £ 2.91 in early trading on the London Stock Exchange, before falling again to £ 2.85.
Approximately 70,000 Deliveroo customers purchased Deliveroo shares worth GBP 250 and GBP 1,000 at the issue price of GBP 3.90 before the initial listing last Wednesday. In total, Deliveroo sold shares worth £ 50 million to retail investors through a platform called PrimaryBid.
However, due to conditional trading restrictions, these loyal customers were locked in their positions until Wednesday this week. As a result, they had to sit down and watch the Deliveroo share price fall by about 30%, the biggest drop taking place on the morning of the company’s launch.
Some retail investors told CNBC last Thursday that they had lost hundreds of pounds at the IPO and regretted their investments.
“I wish I had allowed the conditional week to set the price and then place our shares when we can actually trade them,” an investor told CNBC.
Another said he intends to keep his shares for the time being and hopes they will raise the price in a few months. “You can’t do much with them at this price,” they said.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said in a note on Wednesday that Deliveroo’s share price is being raised by new retail investors.
“It will be a bit of a comfort for Deliveroo customers who have been encouraged to buy a portion of the company, but who seem to have rolled their dice at a disastrous start,” she said. “Like a fateful round of Monopoly, they were blocked from selling their shares for a week, while the company’s initial valuation fell sharply.”
“Now they finally have a ‘get out of jail’ card, but it seems that for the time being many have kept it in their back pockets, waiting for it to stabilize prices,” Streeter added. “The total trading volume on the market is almost unchanged from yesterday.”
Streeter noted that IPOs should “provide much fairer conditions from day one for all classes of investors.”
While the IPO helped Deliveroo raise $ 1.5 billion, it fell as one of the worst on the London Stock Exchange for a large company. At one point, Deliveroo was aiming for a market capitalization of £ 8.8 billion, but the company is currently valued at just £ 5.2 billion.
What went wrong for Deliveroo?
In the days leading up to the IPO, several large investment firms have said they do not intend to invest in Deliveroo. Legal and General, Aberdeen Standard, Aviva and M&G – which collectively have about 2.5 trillion pounds in assets under management – all avoided Deliveroo’s debut.
They cited concerns about: evaluation; the employment situation of the 100,000 Deliveroo pilots (several of whom plan to strike in London on Wednesday); and the dual-class shareholding structure that gives CEO Will Shu over 50% of the voting rights.
Early investors told CNBC that Deliveroo bankers had misappropriated IPOs, with much of the blame going to Goldman Sachs. Goldman, for his part, did not accept that he had done something wrong.
“The price of an IPO is a very difficult exercise,” Fred Destin, a venture capitalist who has supported Deliveroo from the beginning, told CNBC. “Bankers are accused of leaving money on the table if the price is too low, because there is usually a decent side.”
He added: “Bankers are trying to get the right score between leaving the top for new investors and not leaving too much on the table for sellers. That’s what the book-building exercise is for. It’s an art rather than a science, because the zeitgeist matters. a lot, as I just saw with ROO. “
Streeter said more accurate pricing is crucial to maintaining retail investor enthusiasm for future IPOs.
“The offer, at £ 3.90 per share, gave Deliveroo a valuation of around £ 7.6 billion, well above its valuation of around £ 5 billion in January after a round of investment, however there were no improvements fundamental aspects of his perspectives, “she said. . “Instead, the float came at a time of growing concern about its concert economy model and the expectation that lowering Covid restrictions could lead to an initial business recession.”
In an attempt to support Deliveroo’s IPO, Goldman bought Deliveroo shares worth £ 75 million, according to a report published by The Financial Times on Tuesday, citing sources familiar with the matter.
Goldman declined to comment when contacted by CNBC.