Deliveroo went public on the London Stock Exchange this week, however the delivery service company was shunned by investors upon its debut.
It was meant to be a landmark moment for the food delivery tech company and the London Stock Exchange. On Wednesday though, Deliveroo’s shares plunged as far as 30%, with three major hedge funds betting against the stock by taking short positions.
Gig Economy Concerns Deter Investors
The driving force behind the debut flop for Deliveroo has been concerns over the gig economy model it relies upon so heavily. A number of high profile UK investors said that they wouldn’t be buying the shares due concerns over the ‘flexible’ working model that Deliveroo relies upon in order to be profitable.
The main corners from investors are surrounding regulation and workers rights. In the UK last month, a Supreme Court decision ruled the Uber must now treat its UK drivers as workers, with full sick pay and holiday rights. There are concerns that the same could happen to Deliveroo, which could have a massive impact on the future profitability of the company.
Shares Fall Far Short of Target
Deliveroo started trading on the London Stock Exchange at £3.90 per share, with initial hopes that the price could rise as high as £4.60. Instead, quite the opposite happened. By the time trading closed on Thursday April 1, the price closed at £2.82, having been as low as £2.77 during the trading day.
In total, Deliveroo has dropped nearly £2 billion in value since it began conditional trading on Wednesday morning. However, the tech start-up does still have the option to cancel the IPO. If they choose to do so, this would void all trades made before April 7, when unconditional trading starts.
The Largest LSE Launch for a Decade
Deliveroo going public on the London Stock Exchange is London’s biggest launch for a decade. It’s was also viewed as a landmark moment, as it’s the first time that a high profile tech company has chosen to go public on the London Exchange.
Deliveroo was started in London in 2013 by Will Shu and is now backed by Amazon. It was hoped that Deliveroo’s LSE listing would attract more major tech companies to the UK. However the anticipation has thus far been met with a massive anti climax thanks to the debut trading flop.
“True British Tech Success Story”
At the beginning of March Rishi Sunak, the UK Chancellor, had claimed that Deliveroo’s listing on the London Stock Exchange was a “true British tech success story”. He then went on to claim that it would pave the way for further rapidly growth tech start-ups to go public on the London Exchange.
In the opening days of trading it looks like Mr. Sunak has been left with a bit of egg on his chin, but it is early days. We won’t likely get a picture of how Deliveroo sticks will perform long-term until there is clarity on the position of its workers.