An estimated 70,000 retail investors see value of investments fall as takeaway firm’s IPO ‘falls flat on its face’
Shares in the takeaway food firm Deliveroo slumped by more than a quarter on its stock market debut, as the eagerly anticipated float turned sour for an army of small investors.
The float was viewed as a big moment for the London Stock Exchange, which has struggled to attract listings from fast-growing tech companies that have preferred to join US markets. The chancellor, Rishi Sunak, had previously described Deliveroo as a “true British tech success story” and the company has been urging customers to buy shares via its app in a campaign that helped coax an estimated 70,000 people to spend £50m on stock to accompany their meals.Deliveroo shares plunge in disastrous market debut – as it happenedRead more
But after the share listing was unveiled, it was beset by bad publicity, as City investors and campaign groups alike expressed concerns about the pay and conditions faced by Deliveroo’s self-employed riders, some of whom said in a survey that they in effect earn less than the minimum wage.
There have also been question marks about the Deliveroo founder Will Shu’s plan to retain control of the firm after the float, the company’s prospects as the pandemic abates, and how it might reverse losses that have piled up to reach £875m in the past four years.
Amid growing uncertainty, the company had already priced its float at the lowest end of a range initially set between 390p and 460p. That meant it was seeking a valuation of £7.6bn. At 460p, it would have been worth £8.8bn.
Deliveroo blamed “volatile” market conditions for curtailing its ambitions. But as its shares began trading, the price slumped well below even the revised price.
Shares initially fell by as much as 30% before recovering slightly to register a 26% deficit by the end of the day, at 287p. That decline wiped nearly £2bn off the value of the business. It was the worst ever first-day performance for a London IPO worth more than £1bn, the markets platform Dealogic said.
The disappointing start to life on the stock market means retail investors have already lost a quarter of their investment, on paper at least. Deliveroo customers could apply for a maximum of £1,000 worth of shares, which are now worth £260 less.