The Deliveroo share price struggles have continued this week. The stock declined by almost 4% yesterday even after the company published relatively encouraging numbers. It is trading at 260p, which is more than 40% below its IPO price.
What happened: Deliveroo, a British unicorn, has had it rough as a publicly traded company. The company’s IPO, which was the biggest in the UK in more than 9 years, was also the worst as the stock crashed by 30% on its first day.
This performance happened as top UK investors like Standard Life Aberdeen announced that they would not participate. They were concerned about the company’s share structure, where the founder has about 50% of the voting rights. There are also concerns about the sustainability of the freelance-model of doing business.
Yesterday, the Deliveroo share price dropped even after some encouraging news. The company said that demand for its platform surged this year as more people stayed home. It handled 71 million orders, more than double what it did in 2020. The firm also warned that this growth could start to fade as the economy reopened. The CEO also reassured investors, saying:
“My message to retail shareholders and the wider investor community is: it is on me to prove the long-term value of this company.”
Deliveroo share price forecast
The ROO share price has struggled as a public company. It is now valued at just 4.8 billion pounds, lower than the pre-IPO valuation of more than 8 billion pounds. As a result, it remains below the moving averages but it is above the all-time low of 241p.
In my view, the stock is in a price-discovery mode as investors find ways of valuing the firm. This could see the stock retest the low at 241p. At the same time, buying the stock when everyone is fearful could lead to some substantial returns later on. Indeed, this trend has happened globally as companies like Uber and Lyft dropped shortly after the IPO.