London- Well, the shares of Amazon-backed food delivery firm Deliveroo have now climbed by almost 3% on Wednesday morning. This is because the retail investors started trading with the company’s stock for the first time.
Now, the company’s share price has enhanced from £2.80 ($3.86) to £2.91 in the early deals on the London Stock Exchange, before it dips again to £2.85.
Notably, some 70,000 Deliveroo consumers purchased between £250 and £1,000 which worth of Deliveroo shares at the £3.90 issue price before its initial listing last Wednesday. Deliveroo has sold £50 million worth of stock to retail investors through a platform known as PrimaryBid.
Because of the conditional trading restriction, the loyal consumers were locked into their positions till this week, Wednesday. Thus, they have to sit back and watch Deliveroo’s share price crash by almost 30% with the decline happening on the morning of the company’s market debut.
However, some of the retail investors have mentioned on Thursday that they had lost hundreds of pounds in the IPO and they have regretted their investments.
Investors mentioned, “I wish they had let the conditional week happen to settle the price and then placed our shares when we could actually trade them.”
It is an IPO that helped Deliveroo in raising $1.5 billion, which has now gone down as it is one of the ever on the London Stock Exchange for a large company. At a certain point, Deliveroo is aiming for an £8.8 billion market cap, on the other hand, the company is currently valued at just £5.2 billion.
In comparison, U.S. rival Deliveroo is valued at around $42 billion but it is found that the share price has fallen sharply in the last six months. Now, the question that investors most often ask is how important the food delivery will be after the pandemic.
On Tuesday, Delivery Hero, Just Eat Takeaway, Ocado, and HelloFresh has found their share prices fall on the European market.
What was wrong with Deliveroo?
Certain days are leading up to the IPO as several large investment firms mentioned that they had no plans of investment in Deliveroo. As per the Legal, General, Aberdeen Standard, Aviva, and M&G that is collectively about £2.5 trillion in assets under the management that all shunned Deliveroo’s debut.
However, they have cited concern regarding the valuation, the employment status of Deliveroo’s 100,000 plus riders, and the dual-class share structure which will give CEO Will Shu more than 50% of the voting rights.
Investors informed the reporters that Deliveroo’s bankers received the wrong pricing on the IPO where much of the blame is going to Goldman Sachs. Moreover, Goldman on its part didn’t accept whether anything that it got anything wrong. Fred Destin, a venture capitalist who backed Deliveroo mentioned, “Pricing an IPO is a really hard exercise. Bankers get accused of leaving money on the table if price is too low because there is a decent secondary portion usually.”
He also added: “Bankers are trying to hit the right note between leaving upside for new investors and not leaving too much on the table for sellers. That’s what the book building exercise is for. It’s art more than science as the zeitgeist matters a lot, as we’ve just seen with ROO.”
However, as per the report, in a bid to prop up Deliveroo’s IPO, Goldman purchased around £75 million worth of Deliveroo shares for itself. When he was asked about it he declined to comment.