Shares of the Deliveroo start-up fell by more than a quarter on the company’s first trading day on the London Stock Exchange on Wednesday (31/3/2021).
Even though the debut of the Deliveroo stock market is targeted to be a great success, because this food delivery startup that was founded in 2013 is growing rapidly thanks to a surge in demand during the pandemic.
But Deliveroo’s IPO, the largest in London since 2011, was a catastrophe. Shares fell when trading started on Wednesday, and shares eventually closed 26% below their listing price, wiping out nearly US $ 2.8 billion from Deliveroo’s initial market cap. Shares lost another 1.9% on Thursday.
Previously, Deliveroo tried to persuade UK customers to buy a stake in its IPO by displaying advertisements to them in the main application and emailing them prior to listing.
About 70,000 of Deliveroo’s customers agreed to buy the stock for 50 million pounds at an issue price of 3.90 pounds via a platform called PrimaryBid. Each customer can spend between £ 250 and £ 1,000 on stock.
On Thursday, Deliveroo’s share price slumped as low as 2.75 pounds (Rp. 55,000), which means that many of the investments are now worth hundreds of pounds less than what had been paid. Retail investors will not be able to sell their shares until full trading begins on April 7.
It’s been Worst in Two Decades
Data provider Dealogic said its opening day performance marked London’s worst debut for a major IPO in at least two decades. One of the company’s bankers told the Financial Times it was “the worst IPO in London history.”
According to experts, there are a number of factors behind Deliveroo’s IPO failure, including price, timing, uncertain business prospects, concerns about how the company treats workers and the increased regulatory risk facing gig economy firms.
“The starting price is just wrong. What lay eggs here are the advisors,” said Alasdair Haynes, CEO of Aquis Exchange, a rival of the London Stock Exchange and CBOE startups, quoted by CNN International.
Citing “volatile global market conditions,” Deliveroo has set its IPO price at the bottom of its targeted range, despite insisting that it has “very significant demand from institutions around the world.” But even that is too expensive for investors to bear.
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