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Deliveroo
“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’,” says AJ Bell Investment Director Russ Mould.
“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.
“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.
“This is likely to have spooked a lot of people who applied for shares in the IPO offer, meaning they are racing to dump them.
“The fact Deliveroo’s shares were priced at the bottom of the range it had previously set out would suggest institutional investors were only prepared to buy stock if they got them at a discount. This is quite normal practice and known as being ‘priced to go’. Sometimes in these circumstances, one would expect the shares to perk up once they start trading on the market.
“With Deliveroo, one must question if the knee-jerk reaction we saw at the market open is simply a short-term issue and if investors who like the long-term growth opportunity will flock to buy stock at the even cheaper price, given how the shares have fallen more than 20% on their market debut.
“There are multiple ways of looking at the business. Bulls will say the pandemic has made online food ordering part of everyday life and this trend will remain intact once life returns to normal. Bears will say it is a highly competitive space, Deliveroo doesn’t make any money and that takeaway ordering volumes will ease once the pandemic ends.
“Fast growth jam tomorrow shares are no longer in fashion as investors now prefer lowly-valued stocks that offer jam today. That meant Deliveroo was already fighting a headwind as soon as it hit the stock market.”
Markets
“The FTSE 100 is on course to close out a turbulent first quarter of 2021 with a disappointing session.
“The bogeyman which has haunted investors since late January – rising bond yields and what they say about inflation and interest rate risks – is rearing its head once again.
“This put US and Asian stocks under some modest pressure and the weak sentiment has extended to Europe on Wednesday.
“The other message to take from the increase in bond yields is a more positive one, namely that people are feeling more confident on a vaccine-led recovery again after a period when doubt had started to creep in amid apparent signs of vaccine nationalism.
“And ultimately it is worth remembering that barring something extremely dramatic today, global stocks are on course to have enjoyed reasonable gains overall in the first three months of the year.
“The latest data on the Chinese services and industrial sectors painted a picture of a continuing and accelerating recovery.
“With Easter fast approaching, the markets may be in snooze mode for a while – although the unpredictable course of the pandemic and the economic recovery from Covid means they could be jolted out of their torpor at any second.”
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