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How locked-in retail investors plan to navigate Deliveroo’s nightmare stock market debut

Deliveroo CEO Will Shu.

Aurelien Morissard | IP3 | Getty Images

LONDON – Tens of thousands of amateur investors have been left wondering whether they were right to snap up the stock of food delivery app Deliveroo.

Shares of British start-up Deliveroo on Wednesday crashed by more than a quarter on the firm’s first day of trading on the London Stock Exchange.

Deliveroo tried to tempt U.K. customers to buy shares in its IPO by showing them ads within the main app and emailing them ahead of the listing.

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

On Thursday, Deliveroo’s share price sank as low as £2.75, meaning many investments were now worth hundreds of pounds less than what had been paid for them. Retail investors can’t sell their shares until full trading commences on April 7.

‘Impulse buy’

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

“It seemed fun to have a connection to a service I actually use and I like the democratization aspect of opening these things up, but I’m not convinced I’ll make my money back,” they said. “I’m fortunate it’s no biggie for me but aware other customers may not be in the same boat.”

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

“It’s a significant part of my savings, but I felt that would be a good way to dip my toe into investing in a large U.K.-based company, similar to how many people in my parents’ generation signed up for shares in the 80s when companies such as British Gas were being privatized.”

The analytics manager, who has been a Deliveroo customer for several years, said the ‘Community Share Offer’ was “heavily marketed” by Deliveroo. “I received several emails a month ago, it was on the front page of the app, and I think Deliveroo were really able to cultivate a sense of FOMO amongst their customers,” they said.

“At the time, Deliveroo was a company with strong prospects, and no one had any idea that the company (was) going to use dual-class shares that meant that Will Shu would still retain majority control. People who had signed up through the Community Share Offer had no visibility or communication of this when signing up, or the backlash that this would create among fund managers.”

In a bid to reassure investors, Deliveroo pointed out that it’s still early days for the company on the stock market.

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

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

‘Information asymmetry’

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