Deliveroo’s IPO failure

A comment at the FT:

“Goddammnit, I just sold a block of stock at 23% over market price!”

“Bummer”

10 thoughts on “Deliveroo’s IPO failure”

  1. Well done to them for doing the IPO just before lockdown ends. Will people still order KFC for delivery once they’re allowed to leave the house and see friends? The stock has no upside and plenty of downside.

  2. Will people still order KFC for delivery once they’re allowed to leave the house and see friends?

    Anyone who’s been at home ordering KFC for a year probably can’t fit through the front door now. That’s not necessarily the case in London of course, where the KFC demographic will be keen to get back in the chicken shop in order to stab people.

    I suspect the correlation between institutions which have invested in Deliveroo and institutions whose research and strategy teams insist that “COVID has fundamentally changed the way we live and work” will be quite strong.

  3. When the price of a tradeable asset moves sharply then two things happen:
    1. Someone gains
    2. Someone loses
    In this case the clear losers are those persuaded to buy a new stock at a misguidedly high value. Caveat emptor. The winners are the sellers of the stock. Well done to Deliveroo and even better done to their investment bankers. They’ve generated far more value for their client than was perhaps reasonable to expect. I see the story as a stunning succes for investment bankers and a stunning shit show for the asset management / investment industry (if they are the buyers). If the buyers are the retail trade then the old adage ‘a fool and his money are easily parted’ applies.

  4. Patrick

    “When the price of a tradeable asset moves sharply then two things happen:
    1. Someone gains
    2. Someone loses”

    I don’t think you mean that literally.

    If the price goes up, whoever was holding it gains. If it goes down, they lose….

    Whoever was owning it before or after, or whether the sharp movement was permanent or then reversed.

  5. Failure? Sounds like a success to me. Got it away at 50% more than the market price. Where’s the failure in that?

  6. I see from The Times that ‘loyal’ Deliveroo customers could subscribe for up to £1,000 of shares – there were 70,000 applicants. But that’s only from a £50 million allocation, so a drop in the ocean.

  7. The hurdle with a lot of these services is to get people to start using them and the business to sign up, Covid has accelerated that and even with a drop after ‘normal’ returns they will be ahead of any ore-Covid business plans.
    How they manage a transition down to a lower level will be the key as well as how close they are to a sustainable model.
    A year is long enough to build habits and some people while scaling back will continue to use these services, businesses are likely to be too worried in the short term and delist in the hope customers turn up in person

  8. @PF to Patrick
    When a tradeable asset price moves sharply,there is by definition a surplus of traders in one direction. ie more potential buyers than there are willing sellers. That’s why the price moves. Buyers are raising it to encourage sellers. It does not imply there has been a high volume of trade in the asset. It’s entirely possible there’s been no trade at all. Buyers have raised the offer without drawing out any sellers. Likewise, it’s likely that the bottom can fall out of a price on no selling. All trades need both a buyer & a seller. Who wants to buy something everyone else wants to sell?
    “If the price goes up, whoever was holding it gains. If it goes down, they lose….”
    Only if they trade. Otherwise they’ve gained or lost zilch. They have the asset they had yesterday. Price is discovered at an instant when you trade. And by definition, the trade satisfied both buyer & seller. What the next buyer & seller will agree on is anyone’s guess. There is no such thing as value.

  9. I take the point (and the wider concept of realised vs unrealised), but you are back on the floor again! Illustrated wonderfully by “there is no such thing as value”….

  10. Apparently they lost money in the last year. If you can’t make money out of home delivery of food during a freak event when all the pubs and restaurants are closed by law, when exactly are you hoping to become profitable?

    I don’t think I’d be investing on this basis.

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