Deliveroo shares plunge on stock market debut

Deliveroo shares plunged 30% on its stock market debut on Wednesday.

In what was one of the biggest IPOs seen in a decade,  trading as low as 271p within the first 20 minutes of trading.

AJ Bell investment director Russ Mould said: “Deliveroo has gone from hero to zero as the much-hyped stock market debut falls flat on its face. It had better get used to the nickname ‘Flopperoo’.”

“Initially there was a lot of fanfare about the Amazon-backed company making its shares available to the public, including the ability for customers to buy stock in the IPO offer,” Mould added.

“Sadly, the narrative took a turn for the worst when multiple fund managers came out and said they wouldn’t back the business due to concerns about working practices,” he added.

Revenues at Deliveroo have soared over the course of the pandemic as people have been staying in an ordering more food.

Before its stock market debut, the group priced 384.6m shares at 390p each.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said the group’s downfall was its regulation around worker rights.

She said: “If forced to offer more traditional employee benefits, like company pension contributions, Deliveroo’s already thin margins would struggle to climb, and the road to profitability would look very tough indeed.

“Throw in the recent developments at Uber, and general market volatility, and the net effect is one of increased anxiety. Sadly for the group, anxiety doesn’t tend to inflate share prices.”