Two weeks on we see how the Deliveroo IPO went. Deliveroo (ROO) failed to deliver in its London IPO last month, with shares plunging as much as 30% in its first day of trading. CEO admits the end of lockdown will hit their growth. So is Deliveroo one to avoid?
The stock floated at 390p but has since fallen to 269p two weeks later with the CEO’s worries dropping the shares a further 3p. Goldman Sachs and JP Morgan, which led the float have been accused of valuing the company too high especially in the current uncertain environment.
Yesterday, Deliveroo CEO Will Shu shares concerns that the end of lockdown will hit company growth resulting in a wobble to their stock price. Some analysts were concerned that the IPO would do great but then would sharply drop for this very reason. As lockdown measures ease and the weather gets better, the public are more likely to want to go out and about to enjoy pubs and restuarants rather than hae a night in.
“Deliveroo expects the rate of growth to decelerate as lock downs ease, but the extent of deceleration remains uncertain.”
Some investors avoided the company out of concern for workers rights. A central part of the Deliveroo business model is to have workers that are super flexible but with a workforce of over 100,000 globally it might be time to change their tune. Supposedly, rider satisfaction is at an all time high at 89%.
Another issue has also arisen, CEO, Shu, has given himself voting rights well above his stake in the company due to his innovative dual share system he brought in.
Overall, Deliveroo has been performing phenomenally during lock down with sales growing 114% in the first three months of 2021. The 71 million orders that amassed over this time gave a nice £1.65billion take for the food delivery company.
The food delivery company now reaches over 60% of the UK population and says the different levels of lockdown restrictions across 12 markets will give an idea how people change behaviour with easings. For example, even since lockdown restrictions have been removed in Hong Kong, there is still resilient growth for Deliveroo,
Should I buy Deliveroo stock?
I believe the Deliveroo share price is more reasonably priced than in its IPO. But I still think it is overpriced. In fact, the company has a price-to-book ratio of around 27, which is a major indication of over-valuation.