Shares of Deliveroo (LSE: ROO) fell 30% in a spectacular fashion on Wednesday in the stock market debut in London.Fundamental analysis: Disappointing IPO
Deliveroo hit a valuation of 7.6 billion pounds ($10.46 billion) after the company priced its shares at 390 pence apiece, which is lower than analysts’ estimates. Numerous British fund managers, including Aberdeen Standard Life, Aviva, Legal & General Investment Management, and M&G, said previously they will not take part in the IPO as they have concerns with the company.
“Investors are turning away from the work-at-home play and putting their money into the economic recovery play. Deliveroo got caught in the middle of a huge rotation. It was the last IPO of the old COVID world,” Fabian de Smet, head of investment banking at Berenberg, said.
Deliveroo sold 384,615,384 shares to raise about £1.5 billion with the majority going to the company while existing shareholders raked in over 30% of these proceeds.
“This isn’t hugely surprising given the substantial background noise surrounding the company. The biggest concern is regulation around worker rights. The flexible employee model of Deliveroo’s riders is a huge pillar of the group’s plans for success,” Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.
Analysts and industry experts voiced concerns over the company’s business model and a dual-class share structure. As a result, nearly 2.3 billion pounds was wiped off Deliveroo’s valuation in today’s trading session.Technical analysis: Shares crash on weak demand
Shares of Deliveroo were priced at 390p apiece yesterday but the stock price was crushed in the first few minutes in today’s debut. It was evident that the demand for shares of Deliveroo was weak as the price action dipped below the 300 mark to record a low of 271p, representing a drop of over 30% compared to the marketed price.Deliveroo hourly chart (TradingView)
It is advised to retail investors to wait until the dust settles and more fundamentals are presented about the company’s business model before deciding whether to invest or not in shares of Deliveroo.Summary
Deliveroo stock price crashed over 30% on the stock market debut as analysts and industry experts voiced concerns over the company’s business model and a dual-class share structure.
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