What PrimaryBid retail investors plan to do next

LONDON – Tens of thousands of amateur investors have questioned whether they are right to acquire the stock from the food delivery app Deliveroo.

Shares of UK start-up Deliveroo fell by more than a quarter on Wednesday on the company’s first day of trading on the London Stock Exchange.

Deliveroo tried to get UK clients to buy shares as part of its IPO by showing them ads in the main app and emailing them before it went on sale.

Some 70,000 clients of Deliveroo have agreed to buy £ 50million ($ 68.9million) of shares at the issue price of £ 3.90 through a platform called PrimaryBid. Each customer was able to spend between £ 250 and £ 1,000 on shares.

Deliveroo’s share price fell as low as £ 2.75 on Thursday, meaning many investments were now worth hundreds of pounds less than what was paid for them. Retail investors cannot sell their shares until the start of full trading on April 7.

“I feel like a wally,” one amateur investor told CNBC, describing their investment in the midst of the hundreds as an “impulse buy”.

“It seemed like fun to me to have a connection with a service that I actually use and I like the democratization aspect of opening up these things, but I’m not convinced I’m going to get my money back,” they declared. “I’m lucky this isn’t a problem for me, but I realize that other customers may not be in the same boat.”

Another amateur investor, who works as an analysis manager in London, said he had “a lot” of regrets after investing the maximum of £ 1,000.

“It’s a big part of my savings, but I thought it would be a good way to invest in a large UK based company like the number of people from my parent’s generation who signed up for shares in the 1980s when companies like British Gas were being privatized. “

The chief analyst, a client of Deliveroo for several years, said that the “community sharing offering” was “heavily marketed” by Deliveroo. “I received several emails a month ago, it was on the first page of the app, and I think Deliveroo has really been able to cultivate the sense of FOMO among its customers,” they said.

“Back then, Deliveroo was a company with a solid outlook, and no one knew that the company (was) going to use dual class actions, which meant that Will Shu would still retain majority control. People who signed up through the community sharing offer had no visibility or communication about it when they signed up, nor the backlash it would create among fund managers. “

In order to reassure investors, Deliveroo pointed out that the company was still in its infancy on the stock market.

“Although trading started off lower than we would have liked, we are just starting our life as a public company and are confident that our winning proposition will bring long term value to all shareholders,” said a CNBC spokesperson for Deliveroo.

“We thank each of our customers who participated in our customer offering and will work tirelessly for them every day,” they added.

Jordan Mary, a 31-year-old photographer, told CNBC he invested £ 500 in Deliveroo after having had some success on an early bet on fintech firm Revolut through crowdfunding platform Seedrs.

He admitted that he felt disappointed with the way the Deliveroo IPO went. “It’s a huge world of speculation,” said Mary.

Another investor told CNBC that she “isn’t feeling too positive” about her investment. The doctor, who invested in Deliveroo to see what it would be like to be part of an initial crowd-based public offering, said she believed her £ 1,000 investment is now worth around £ 667. “To be honest, £ 1,000 is not a huge amount to lose,” she said. “However, that would be for a lot of customers and I’m not sure PrimaryBid is great for customers in the grand scheme of things.”

A spokesperson for PrimaryBid said the company was “keenly aware of the importance of marking out the risks of investing in an IPO.”

“The only thing we cannot do is tell customers which direction the actions will go,” the spokesperson added. “We have concluded more than 100 contracts in the last twelve months: sometimes they increase and sometimes not.”

They added that they had gone the extra mile to reiterate the risks given Deliveroo’s customer base and the plaintiff’s likely profile.

Angela Jameson, a communications professional in London, said she spent £ 500 on Deliveroo shares on the PrimaryBid app. “The price is down almost 28% now, so that £ 500 is theoretically worth £ 360,” she said. “I’m going to hold these stocks until I at least break even and I don’t care how long it takes because I’m not a trader – I buy and still hold.”

Jameson said she was surprised by the market reaction as she believes there is a strong pent-up demand from retail investors to invest in innovative technology stocks early.

“I wish I could invest in more companies at an earlier stage,” she said. “The ones that really appeal to me are in areas where companies have a unique technological or scientific advantage, and that’s basically why I haven’t invested more in Deliveroo. It won’t deter me from buying tech stocks. Savers are not. will do very well if they only invest in FTSE or trackers. “

Manchester-based Anthony Morrow, financial adviser and founder of OpenMoney, told CNBC he bought £ 300 of Deliveroo shares for his teenagers to introduce them to investing.

The IPO “was announced in the app alongside my local pizzeria and kebab,” he said, adding that his family used Deliveroo frequently.

“I’m in this game so I understood there would be a risk,” Morrow said. Its older sibling, however, was very disappointed and suggested that they should start using JustEat for their takeout instead of Deliveroo.

Morrow said he imagines that many of the 70,000 clients who have backed Deliveroo’s IPO would likely be disappointed.

“That’s the danger of having the PrimaryBid arrangement,” he says. “If that doesn’t go as planned, you can alienate a lot of people who are good customers in a competitive market.”

Morrow believes regulators should investigate how Deliveroo marketed its IPO to clients, adding that the prospectus was written like a real estate agent promoting a house. “There are very few downsides to it and if there is, it’s hidden,” he said. “Certainly not what you would call outweighed by all the perks.”

Retail investors often choose to back companies because they like the brand or they like the service, Morrow said.

“Unless you’re an institutional and professional investor, you’re not going to dig into this prospectus to find out and understand the implications of things like the Uber shutdown and the labor law shutdown. You aren’t going to understand or hear talk about the fact that some of the big fund managers are avoiding stocks. And that’s just unfair. “

Oliviu Gavrilescu, software developer and hobbyist investor, told CNBC: “The problem I have with the idea of ​​opening IPOs to retail to be on par with institutions is this. ‘Information asymmetry. Financial institutions have a pretty good idea of ​​the demand for stocks before the IPO, unlike retail. “