It was supposed to be one of the biggest tech IPO debuts on a foreign market, but when food-delivery firm Deliveroo started trading on the London Stock Exchange this morning its share price plunged 30%, wiping as much as $2.7 billion off the company’s market cap, reports Reuters.
DELIVEROO SHARES EXTEND LOSSES, PLUNGE 30% AFTER IPO -BBG
— IGSquawk (@IGSquawk) March 31, 2021
At the opening bell, Deliveroo, whose stock ticker symbol is “ROO,” started trading at 390 pence per share (about $5.37), giving it a valuation of $10.46 billion. But within minutes Deliveroo stock fell to 299 pence (about $4.12). At the time of this writing, the stock is hovering around that same price point.
But if Deliveroo expected (or at least hoped) to be one of the best foreign tech IPOs of the decade, what happened? That’s always a hard question to answer with a share price’s dramatic rise or fall, but the general consensus seems to be that socially conscious investors stayed away from Deliveroo because of the controversy over how it treats its gig-economy workers.
As financial investment firm PIRC points out in a blog post, many institutional investors that typically get in on hot tech IPOs decided ahead of time not to invest in Deliveroo due to “its treatment of riders who are generally employed on a gig-basis leaving them unentitled to basic benefits.” PIRC says major institutional players like Aberdeen Standard, Aviva, BMO, Legal & General, M&G, Rathbones, Jupiter, and CCLA all refused to purchase Deliveroo shares.
Another reason for the lackluster debut is the fact that Deliveroo has so far never made a profit. While the company’s services have skyrocketed over the past year due to the pandemic, investors could be spooked that as the pandemic begins its slow wind down (hopefully), fewer people will be turning to costly food delivery services at home and instead go back out into the world to eat at restaurants.
One other important thing to mention is that Deliveroo can still cancel its IPO. Yep, even though trading has already begun, Deliveroo IPO’d under conditional trading terms. That means for a set period of time, Deliveroo can void any trades of its stock. Investors’ money would be returned to them and Deliveroo’s shares would remain with the company.
Deliveroo can cancel its IPO up until April 7.. pic.twitter.com/qZHmFhG9UJ
— Sam Shead is OoO ???? (@Sam_L_Shead) March 31, 2021
Deliveroo has until April 7 to cancel its IPO. However, it should be noted that even with its lackluster debut, this is highly unlikely to happen. And keep in mind that at the time of this writing, the trading day is far from over, so it’s too early to say just how poorly Deliveroo performed on its IPO day.