Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Deliveroo IPO debacle leaves small investors with bad taste

Stock MarketsApr 01, 2021 02:41PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A deliveroo delivery driver cycles through the centre of Manchester 2/2

(Refiles to add dropped word in paragraph 9 and delete extra word in paragraph 11)

By Elizabeth Howcroft and Abhinav Ramnarayan

LONDON (Reuters) - London-based amateur trader Amy Lee wasn't sure whether to buy shares in Deliveroo's stock market debut but decided eventually to take the leap, swayed by ad campaigns on the food delivery company's app.

"I took a gamble," she said. "It was my own fault, but I think I was swayed by the thought 'surely Deliveroo wouldn't advertise a bad product to their customers through their app. That would be stupid right?'"

Lee and others like her who were allocated shares worth a total of 50 million pounds ($69 million) are nursing paper losses after Deliveroo shares plunged as much as 30% on their London Stock Exchange debut on Wednesday.

The fall, slicing 2 billion pounds off initial valuations, is a blow to Britain's ambitions of attracting fast-growing tech companies to London.

It may also raise questions about retail traders' appetite for future investments, especially in initial public offerings (IPO) - this was the first time individuals in Britain were given a chance to get in on the first-day action.

Deliveroo had dubbed its campaign: "Great food with a side of shares".

But things went wrong even before the IPO. Several asset managers shunned it, citing concerns about gig-economy working conditions and Deliveroo's corporate governance.

Many amateurs discussing the matter on online Reddit forums cited similar reasons for steering clear.

Since buying 250 pounds worth of stock, Lee has done more research and now says she is "gutted" to have given her money to "what seems to be another greedy tech company lacking social value or drive to do things differently".

But she can't sell until April 7, because of rules around "conditional trading" - a practice customary in London IPOs until the shares "settle", usually lasting a week.

A spokesman for PrimaryBid, a platform that allows retail investors to participate in major share sales, said this had been made clear to customers at every stage.

One Londoner who bought 295 pounds of Deliveroo stock said the company's sales team seemed to have "bent over backwards" to turn diners into investors.

"Every time you placed a Deliveroo order they flashed a sign. They let me invest even without a brokerage account. They said we will open up a Lloyds (LON:LLOY) (bank) account for you and do it for you, (for) a one-off fee of 5 pounds. They made it super helpful," he said, requesting anonymity.

Asked for comment, a Deliveroo spokesperson said: "Although the trading started lower than we would have liked, we are just starting life as a public company and we are confident that our winning proposition will deliver long term value for all shareholders."

"We thank each of our customers who took part in our customer offer and will work tirelessly for them each and every day."

Deliveroo shares have recovered slightly from Wednesday's lows, but their first day performance was the worst on record for a London IPO worth more than 1 billion pounds, markets platform Dealogic said.

DEMOCRACY

Retail investors will likely be wooed by other market debutants as many trading companies, including the Robinhood app, say they want to "democratize" IPOs by not restricting allocations only to institutional investors.

PrimaryBid is in talks with other listings candidates, a source familiar with those discussions has told Reuters.

The company collects orders from individuals and then makes a collective bid on deals. Bankers say it is becoming an influential participant, getting involved in fundraising deals from tech firm Ocado (LON:OCDO) and caterer Compass Group (LON:CPG).

PrimaryBid estimates retail ownership is about 15% of the UK stock market, as many people stuck at home in the pandemic with spare cash have taken to dabbling in equities on trading apps.

While UK amateur participation has risen from 10% in 2009, it lags U.S. levels of 25%-30%.

Still, some - such as Sam Elliot, a London-based primatologist - confess to having become "obsessed" with stock markets, following the frenzy around U.S. video game retailer GameStop (NYSE:GME) in January.

He invested 250 pounds in Deliveroo and, while also "gutted" by the shares' fall, intends to hold them for the long term.

Another investor - and former Deliveroo courier - Rui Lopes also committed 250 pounds, a sum he said he could afford to lose.

"The price drop did get me slightly apprehensive at first ... but you know what they say. Buy the dip!"

And even without the first-day "pop" or surge last year's U.S. deals enjoyed, investors could well end up in the money - after all, Facebook (NASDAQ:FB), Uber (NYSE:UBER) and Peloton (NASDAQ:PTON) were also IPO flops initially.

($1 = 0.7236 pounds)

(Refiles to add dropped word in paragraph 9 and delete extra word in paragraph 11)

Deliveroo IPO debacle leaves small investors with bad taste
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Petros Kazakidis
Petros Kazakidis Apr 02, 2021 5:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Does any of the traders know how to read a balance sheet? 8 billion GBP for a garbage company which will never turn out to have profit?
Dave Jones
Dave Jones Apr 01, 2021 12:03PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hi tech companies lol! delivering food on a bike!!!🤣🤣🤣🤣🤣PMSL!!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email