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Retail investors have significantly contributed to the tweak experienced on the first day of Deliveroo stock trading.
Shares of Amazon-backed Deliveroo Holdings Plc (LON: ROO) are up approximately 2.70% during the first day of public trading in the London Stock Exchange. Deliveroo shares were trading around 287.55 pence, but still down approximately 25% below the IPO price.
Reportedly, the company sold 50 million worth of stock to retail investors through the PrimaryBid platform. Besides, Goldman Sachs purchased approximately $75 million worth of Deliveroo shares according to CNBC.
Retail investors who purchased Deliveroo shares during its IPO last week, their portfolio has shrunk almost 30%. Due to restrictions put in place, they could not trade Deliveroo shares until the week was over. Now, most of the retail traders are left stranded and compelled to wait for the ROO stock price to hopefully recover in the coming months.
“I wish they had let the conditional week happen to settle the price and then placed our shares when we could actually trade them,” one investor told CNBC.
According to Susannah Streeter, a senior investment and markets analyst at share trading platform Hargreaves Lansdown, retail investors have significantly contributed to the tweak experienced on the first day of trading.
Deliveroo (ROO) Shares and the Market Perspective
Several institutional investors including hedge funds have backed out of Deliveroo shares based on underlying challenges that the company is going through. One, some of the institutional investors cited the rider strike that was scheduled for Wednesday. Secondly, they cited the fact that Deliveroo CEO has over 50% voting rights. Coupled with the high valuation amid increased competition in the e-commerce industry, institutional investors opted to watch from the bench.
“The offering, at £3.90 a share, gave Deliveroo a valuation of around £7.6 billion, sharply above its valuation of around £5 billion in January following an investment round, yet there had been no fundamental improvements to its prospects,” Streeter said. “Instead the floatation came at a time of increasing concerns surrounding its gig economy model and the expectation that the easing of Covid restrictions could lead to an initial downturn in business.”
Having popped during the first day of trading, it was not a compelling reason for some analysts. Connor Campbell, an analyst at Spreadex, said the real test for Deliveroo is going to be the coming months. “Though Deliveroo has risen…on the first day of trading available to retail investors, it’s too soon to tell whether this is a vote of confidence in the stock,” Connor said.
As a section of Deliveroo riders take part in the strike, the company’s spokesperson said the company offers a reasonable compensation that is over £13 per hour. “This small self appointed union does not represent the vast majority of riders who tell us they value the total flexibility they enjoy while working with Deliveroo alongside the ability to earn over £13 an hour,” the spokesperson said in a statement.
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