Deliveroo Share Shows Brief Spurt as Retail Investors Begin to Trade

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Summary

  • Deliveroo stock initially edged higher on Wednesday as the retail investors were allowed to trade their shares.
  • The food delivery group had an initial market valuation of £7.59 billion via a price of 390p per share.
  • The institutional investors were allowed to trade shares under the conditional trading clause last week.

Takeaway delivery app Deliveroo shares opened higher on Wednesday, 7 March, when retail investors started to trade stocks purchased during the firm’s initial public offering. The food delivery group had an initial market valuation of £7.59 billion via a price of 390p per share. Around 70,000 retail investors who signed up for the IPO were allowed to initiate trading yesterday. However, the institutional investors had been allowed to trade shares since the firm’s market debut last week itself.

The company’s stocks (LON: ROO) surged around 3 per cent in its intraday trade but closed at GBX 286.00 on Wednesday, unchanged at its previous day’s value. The stock price was still lower than the price of GBX 287.45 on 31 March, its debut price on the bourses.

According to a recent news report in The Financial Times, Goldman Sachs International, the deal’s underwriter had bought shares worth £75 million to boost the trading. These shares along with overallotment reserved provided an opportunity to Goldman to book profit from declining shares.

As part of its IPO, the company had included a community share offer, allowing its customers to participate in the deal.

 

A messy IPO

The Deliveroo stock fell to 271p hours after opening on the first day, slashed close to £2 billion off the firm’s initial valuation and hurting the small retail investors in return. On Wednesday, all the issued shares of the company were admitted to trading on the London Stock Exchange's main market for listed securities under the ticker name "ROO".

The company was also planning to change its name from Deliveroo to ‘Deliveroo Plc’. A relevant announcement in this regard is awaited. It is slated to announce its trading update for the first quarter of this year on 15 April.

Offer highlights

 

The offer comprised of 384,615,384 shares, resulting in a total offer size of nearly £1.50 billion. Moreover, another 38,461,538 shares in the company had been made available pursuant to the over-allotment option. 

Trading update

The company announced its trading update on 22 March for the two-month period from January to February 2021. The company’s total value of transactions on its platform grew 121 per cent y-o-y for the two-month timeframe. The gross transaction value for the UK and Ireland regions grew 130 per cent for January-February this year as compared to the same period last year.

The firm’s underlying gross profit margin as a percentage of its gross transaction value rose from 5.8 per cent in 2018 to 8.8 per cent in 2020.

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