The Deliveroo share price is still languishing, a few weeks after the company launched its disastrous initial public offering (IPO). The ROO stock is trading at 231p, which is more than 40% below its IPO offer. The company is now valued at more than 3.96 billion, which is lower than its peak valuation of more than 8 billion pounds.
What happened: Deliveroo, once a beloved London startup is in trouble. After a well-publicized IPO, the stock price tumbled mostly because of three main reasons.
First, the company’s share structure gave too much power on the CEO and founder. This pushed many London investment managers like Legal & General and Aviva to shun the IPO. When a company is going public, the support of these moneyed companies is usually important.
Second, there are concerns about the company’s business model where it relies on freelancers. While this model has worked around the world, there are concerns about its sustainability. For example, Uber has been in court in London for years about how it characterizes its workers.
Third, there could be a business slowdown as the UK economy reopens. Furthermore, as people start eating out again, the demand for its services could fall. As shown below, the company has been in as strong growth phase.
Meanwhile, the company has been attempting to boost the share price. This week, the company announced that it was expanding its partnership with Sainsbury, a leading UK supermarket chain. The trial will now expand to 100 stores. If it works out, the company could move deeper into groceries.
There is nothing much to talk about the Deliveroo stock price from a technical perspective. Furthermore, the shares have been in a sharp downward trend in a short period. Therefore, in my view, I still believe that the stock will soon bounce as some investors move to buy in the cheap. However, in the near term, the challenges could continue.
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