Company Spotlight: Deliveroo
Dubbed by many as “the worst IPO in London’s history”, Deliveroo’s (ROO.L) debut on the
stock market was, to put it kindly, a disaster. This wasn't very reassuring considering it was the
largest float on the London Stock Exchange for nearly 10 years. The shares in this food delivery business, backed by Amazon, fell as much as 30% on its first day of trading, wiping
over £2bn off Deliveroo’s market value. Many investors voiced concerns, including ethical
issues surrounding the working conditions and pay of its riders, with many earning less than
the minimum wage. Large investment fund managers, such as Legal and General Investment
Management, Aviva Investors and Aberdeen standard, to name a few, all publicly announced that they would not buy shares in the company. Concerns about increasing regulation on the gig economy also weighed on investors’ minds.
Poor timing compounded its dire performance, given that the UK is emerging out of
lockdown. Soon people will be eager to dine out at restaurants as opposed to ordering
takeaways, which became more prevalent during the pandemic. This cast doubts over its
post-pandemic growth. Moreover, they chose to go public on the 31 st of March - not only
the last day of the month but also the final day of the quarter. This was a poor decision-
making given that fund managers tend to avoid taking new positions towards the end of a
quarter and instead focus on rebalancing their portfolios.
Bankers JPMorgan and Goldman Sachs mispricing the offering, as well as short-sellers
betting against the stock also contributed to this so-called ‘car crash’. Finally, Deliveroo’s
dual share class structure led to further opposition from large fund managers. This structure
means different groups of shareholders, such as its founders and minority shareholders,
have disproportionate voting rights. Current listing rules do not permit companies with this
system to be admitted to the London Stock Exchange’s FTSE 100, meaning that passive
index tracker funds would not need to invest in it.
S&P 500
Last Monday, the index began almost flat, down 3.25 points. Bank shares plunged in
response to the Archegos Capital scandal; however, vaccine optimism helped counterbalance losses. Credit Suisse lost almost 14%; Morgan Stanley was down 2.6% and Citigroup down 2%. On Tuesday, the S&P 500 fell 0.3%, with US technology stocks putting downward pressure on the index. Investors rotated away from pandemic winners in favour of stocks positioned for the largest gains from global economic recovery. Moreover, rising yields on US Treasuries further contributed to losses. This is due to their impact on borrowing costs, impacting the valuations of growth stocks. The index closed up 0.4% last Wednesday, following news of an anticipated $2trillion US stimulus plan. Technology shares led to gains. The S&P 500 hit a new record high, reaching the 4,000 milestone last Thursday. The index made gains of 0.8% for the day, led once again by technology stocks. Markets were closed on Friday due to the Good Friday holiday. The week ended a mere 3.29 points down; however, the index achieved its fourth straight quarterly gains.
FTSE 100
Last week began with the FTSE 100 edging down 0.1%, with investors cautious following the
huge sell-off in US stocks linked to Archegos Capital the previous week. Last Tuesday, the
index rose 0.5%, with vaccine optimism fuelling gains. Bank and mining stocks, as well as
other reopening winners, such as IAG, made the largest gains. This came following news
that the UK had secured a deal with GSK to produce and package 60 million doses in north-
east of England. This put an end to supply chain issue concerns arising from the threat of an EU vaccines embargo. Last Wednesday, the index closed 0.9% lower. Appreciation of the pound put downward pressure on the index. This followed data showing the UK economy grew faster at the end of last year than previously thought. This is due to the majority of revenue from FTSE 100 companies coming from overseas; thus, appreciation of the pound hurts their sterling-denominated earnings. On the last day of trading before the Easter break, last Thursday, the index closed 0.4% higher at 6,737.30 due to optimism surrounding the
reopening of the UK economy. Travel stocks made gains, with IAG up 5.7%, Tui up 3.7% and
Trainline up 3.3%. The week ended a mere 3.29 points down.
Asia
Last week began broadly higher, with the Nikkei 225 up 0.7%, the CSI 300 up 0.2%, having
risen as much as 2% throughout the session, and the Hang Seng down 0.05%. This followed
Wall Street highs as investors focused on hopes of a return to normality, encouraged by
successful rollout of coronavirus vaccines. Moreover, investors were optimistic as the Suez
Canal was finally unblocked. Last Tuesday, the Nikkei 225 inched up 0.16%, the Hang Seng up 0.8% and the CSI 300 up 1%. Gains in China were led by increases in new energy and
healthcare stocks. Last Wednesday, Asian stocks headed lower amid rising yields. This was
due to investors awaiting more information regarding the next US stimulus measure. The
CSI 300 slipped 0.9% lower, with the real estate sector weighing on the Chinese index.
Japan’s Nikkei 225 closed down 0.8%. Last Thursday, Asian indices made gains, with the
Nikkei 225 up 0.7%, the Hang Seng up 1.98% and the CSI 300 up 1.2%. Investors assessed
economic data from China and Japan. In China, the gains were led by shares in consumer
discretionary and healthcare. In Hong Kong, technology shares boosted the index, following
optimism surrounding the proposed US stimulus plan.
Chinese stocks ended the week on an upbeat note last Friday, with the CSI 300 up 1% on the
day and climbing 2.5% for the week. This was its second-consecutive week of gains. This followed investors optimism surrounding US shares reaching record levels and positive data,
including data showing a rebound in China’s manufacturing sector, with industrial firms’ annual profits surging in the first two months of 2021. Japanese stocks also ended the week up, with the Nikkei 225 hitting a two-week high. The index closed 1.5% higher last Friday, fuelled by expectations of a corporate earnings recovery and gains in semiconductor-related stocks. This is due to these companies increasing their output in response to a worldwide chip shortage. The yen’s decline in recent weeks also aided many stocks, particularly car
manufacturers.