WATCH: Deliveroo shares rally on first full trading day
Shares in takeaway delivery app Deliveroo (ROO.L) rallied on Wednesday as unconditional trading began.
Deliveroo's shares were officially admitted to the London Stock Exchange on Wednesday following a period of "conditional" trading that began last week. Only institutional investors can exchange blocks of shares during this period.
Wednesday marked the first time retail investors could buy and sell shares in the company, including the 70,000 who invested money in Deliveroo's initial public offering.
Shares in the company rose 3.2% to 289.05p in early trade.
Neil Wilson, chief market analyst at Markets.com, said the rally would be a "a big relief" to Deliveroo and the bankers that worked on its float. There were fears that retail investors could dump shares at the first opportunity, following last week's disastrous debut.
However, Deliveroo's share price still remains well below its IPO price despite Wednesday's uptick. The company sold its shares at 390p-a-piece ahead of its official listing. The stock promptly fell 30% after debuting on the market last Wednesday in one of the worst London listings in history.
"Under the terms of the offer, institutional investors were able to trade when conditional trading began on March 31st," said Susannah Streeter, a senior investment and markets analyst at stockbroker Hargreaves Lansdown. "Although none would have averted significant losses given the immediate price plunge, they had the freedom to cut and run or decide to wait it out for prices to potentially stabilise.
"In contrast, customers, who participated under the community offer, have been paralysed, forced to watch and wait as the other players in the game determined the price."
WATCH: Investors shun Deliveroo IPO
Deliveroo faced a wall of resistance from institutional investors who raised concerns about the company's treatment of delivery drivers. Those who were willing to buy shared voiced doubts over the company's high valuation and governance structure, which gave founder William Shu continued control of the business even after floating.
"The offering, at £3.90 a share, gave Deliveroo a valuation of around £7.6bn [$10.5bn], sharply above its valuation of around £5bn in January following an investment round, yet there had been no fundamental improvements to its prospects," said Streeter. "Instead the floatation came at a time of increasing concerns surrounding its gig economy model and the expectation that the easing of Covid restrictions could lead to an initial downturn in business."
The Financial Times reported on Tuesday night that Goldman Sachs, one of the main banks behind the listing, bought £75m of Deliveroo stock last week to try and prop up the IPO price. The buying accounted for a quarter of all the stock traded in the first two days after listing.
The banks working on the float have blamed short selling for Deliveroo's poor performance. The Financial Conduct Authority (FCA)'s daily register of short disclosures so far shows no open short positions against the company.