How caged retail buyers plan to steer Deliveroo’s nightmare inventory market debut

Will Shu, CEO of Deliveroo.

Aurelien Morissard | IP3 | Getty Images

LONDON – Tens of thousands of amateur investors have wondered if they are right in tracking down the inventory of the food delivery app Deliveroo.

The shares of the British start-up Deliveroo plunged more than a quarter on Wednesday on the company’s first day of trading on the London Stock Exchange.

Deliveroo attempted to lure UK customers into buying stocks as part of its IPO by running ads on the main app and emailing them prior to listing.

Around 70,000 Deliveroo customers agreed to purchase £ 50 million (US $ 68.9 million) of shares at an issue price of £ 3.90 through a platform called PrimaryBid. Each customer could spend between £ 250 and £ 1,000 on stocks.

Deliveroo’s share price fell to £ 2.75 on Thursday, meaning many investments were now worth hundreds of pounds less than what had been paid for them. Retail investors will not be able to sell their shares until full trading begins on April 7th.

“Impulse buy”

“I feel like a fool,” an amateur investor told CNBC, describing her mid-hundreds investment as an “impulse buy.”

“It seemed fun to connect to a service that I actually use and I like the democratization aspect of opening up these things, but I’m not convinced I’ll get my money back,” they said. “I’m glad it’s not a problem for me, but I understand that other customers may not be in the same boat.”

Another amateur investor, who works as an analytics manager in London, said he had “a lot” of regrets after investing a maximum of £ 1,000.

“It’s a significant part of my savings, but I thought this would be a good way to invest in a large UK-based company, much like many of my parents’ generation looked for stocks in the 80s signed up when companies like British Gas were privatized. “

The Analytics manager, who has been a Deliveroo customer for several years, said the “Community Share Offer” was “heavily marketed” by Deliveroo. “I received several emails on the front page of the app a month ago and I think Deliveroo really got a feel for FOMO with its customers,” they said.

“At the time, Deliveroo was a company with strong prospects and no one had any idea that the company (was) The use of two-tier stocks meant that Will Shu would still retain majority control. Individuals who signed up through the Community Share Offer had no visibility or communication about it when signing up, or the backlash it would cause from the fund managers. “

A Deliveroo courier travels along Regent Street delivering takeaway food in central London during the Covid-19 Tier 4 restrictions.

Pietro Recchia | SOPA pictures | LightRocket via Getty Images

To reassure investors, Deliveroo pointed out that the company is still in its infancy on the stock exchange.

“Although trading started lower than we would have liked, we are just starting out as a public company and are confident that our profit offering will bring long-term value to all shareholders,” a Deliveroo spokesman told CNBC.

“We thank each of our customers who have participated in our customer offer and we will work tirelessly for them every day,” they added.

Jordan Mary, a 31-year-old photographer, told CNBC that he invested £ 500 in Deliveroo after getting some success on an early bet on fintech company Revolut through crowdfunding platform Seedrs.

Private investor Jordan Mary.

Jordan Mary

He admitted he’s disappointed with how Deliveroo’s IPO went. “It’s a huge world of speculation,” said Mary.

Another investor told CNBC that she was “not feeling too positive” about her investment. The doctor, who invested in Deliveroo to see what it would be like to be part of a crowd-based IPO, says her £ 1,000 investment is now worth about £ 667. “In fairness, £ 1,000 isn’t a huge loss for me,” she said. “It would be for a lot of customers though, and I’m not sure PrimaryBid is great for customers on a large scale.”

A spokesperson for PrimaryBid said the company is “very aware of the importance of labeling the risks associated with investing in an IPO”.

“The only thing we can’t do is tell customers which way the stocks will go,” added the spokesman. “We have closed over 100 deals in the last twelve months: sometimes they go up and sometimes they don’t.”

They added that they had made extra efforts to reiterate the risks given Deliveroo’s customer base and the likely profile of the applicant.

Angela Jameson, a communications professional in London, said she spent £ 500 on Deliveroo stock on the PrimaryBid app. “The price is now almost 28% down, making £ 500 fictitiously worth £ 360,” she said. “I’ll hold these stocks until at least I break even and I don’t mind how long it takes because I’m not a trader – I always buy and hold.”

Jameson said she was surprised by the market’s reaction because she believed retail investors had a lot of catching up to do to invest early in innovative technology stocks.

“I would like to be able to invest in more companies sooner,” she said. “The ones that really attract me are in areas where companies have a unique edge in technology or science, and that’s why I stopped using Deliveroo. That won’t stop me from buying stakes in technology. Savers are Not.” This will be very good if you only invest in FTSE or trackers. “

‘Information asymmetry’

Manchester-based Anthony Morrow, a financial advisor and founder of OpenMoney, told CNBC that he had bought £ 300 worth of Deliveroo stock for his teenage children to introduce them to investing.

The IPO “was advertised on the app next to my local pizza place and kebab shop,” he said, adding that his family use Deliveroo a lot.

“I’m in this game so I understand there will be some risk involved,” said Morrow. However, his oldest child was very disappointed and suggested using JustEat instead of Deliveroo for his takeaways.

Morrow said he envisions many of the 70,000 customers who helped Deliveroo’s initial public offering are likely to be disappointed.

“That’s the danger of having the PrimaryBid arrangement,” he said. “If things don’t go according to plan, you can alienate many of the people who are good customers in a highly competitive market.”

The Deliveroo app is displayed on a smartphone screen.

Thiago Prudencio | SOPA pictures | LightRocket via Getty Images

Morrow believes regulators should investigate how Deliveroo is marketing its IPO to its clients, adding that the prospectus was written like a real estate agent promoting a home. “There are very few downsides and if there are, it’s hidden,” he said. “It is certainly not what you would call balanced against all the advantages.”

Retail investors often choose to support companies because they like the brand or the service, Morrow said.

“Unless you are an institutional, professional investor, don’t browse this prospectus to find out and understand the implications of things like the Uber ruling and the labor ruling. You are not going to understand or understand the fact that some understand or hear about it hear about it. ” of the big fund managers avoid the stock. And it’s just unfair. “

Oliviu Gavrilescu, a software developer and amateur investor, told CNBC, “The problem I have with the idea of ​​opening IPOs to retail in order to level the playing field with institutions is information asymmetry. Financial institutions have a pretty good idea of ​​that Pre-IPO demand for stocks while retailers don’t. “

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