The absolute catastrophe that was the floating of prominent fast food delivery company Deliveroo's stock on the London Stock Exchange almost one year ago is all but a distant memory.
Deliveroo, like many businesses in its sector, had been doing very well indeed during the run-up to its initial public offering (IPO), largely driven by the lockdowns across its major markets during the year 2020, which caused a large number of people to begin ordering absolutely everything from new furniture to their weekly supermarket shopping via the internet.
Independent logistics and retail delivery companies such as Amazon, Deliveroo and OCADO did very well during that period, and Deliveroo's on-trend appreciation led many critics and observers to think that an IPO would be a natural progression and that the company would be in line for the largest London stock market float in a decade.
Just before the float took place, however, Deliveroo's executives reduced the upper valuation of its then imminent floatation by over £1 billion in March last year, stating at the time that it would price its shares at the bottom of its guided range because of “volatile” market conditions. This landed in the news at the same time as concerns about workers rights made their way into the public domain, with claims that some Deliveroo operatives were earning just £2 per hour.
In the end, Deliveroo listed on the London Stock Exchange at £3.90 one yer ago, but the value plunged immediately, with investors taking a dim view of its £7.5billion valuation which resulted in a lot of finger-pointing and derisory names like flopperoo and disasteroo being bandied around.
Things quickly improved, however, and the company managed to put this right, and here we are, a year later, and the big boys are moving in.
Well renowned British financier Pauil Marshall, co-founder of Marshall Wace Asset Management in London, has taken a short position on Deliveroo stock worth £11 million.
Paul Marshall, who has a personal net worth of approximately £630 million, is not one to take rash and hasty decisions. He is a long established hedge fund manager and investor, and taking such a large position in a company which had a shaky start as a listed entity would not be something he would do lightly.
He is the first large investor to take a short position on Deliveroo stock, which is a very interesting turn of events. Deliveroo stock has been down considerably compared to its better performance after the initial flop, and whilst the dissenting fingers pointed at Deliveroo a year ago, it is actually down further now than it was then, yet not much of a big deal has been made of it this time.
The reality is that every since the start of 2021, Deliveroo's share price has been collapsing. It went at the end of last year from around the £3 mark, and has been going down since, and today is languishing at around £1.05 per share. That is a 70% drop over the six month moving average. Not ideal for a compamny whose IPO had great expectations but turned out to be the failure of the decade.
If this is the case, why would someone as careful and experienced as Paul Marshall take a short position on a stock that appears endlessly doomed. A short position is where an investor makes a 'bet' on the price falling in the short term, usually during the course of a week.
If he is right, that means he expects the stock to decline to even lower levels than its already very low value.
Let's not forget that Marshall Wace has £42 billion in assets under management, making it one of London's respected and established wealth management companies, and certainly not a company which would gamble with its clients' investments or with its own reputation.
Deliveroo therefore remains an anomaly. How could a company which hit the market with the right product and service at exactly the right time be constantly in dire straits?
This is one of those volatile and interesting scenarios, which perhaps is why it is now attracting the big investors in short positions.
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