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Deliveroo hits a new all-time low as hedge fund Odey shorts the stock

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Suban Abdulla
·3-min read
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REGENT STREET, LONDON, UNITED KINGDOM - 2021/03/31: Deliveroo courier rides along Regent Street delivering Takeaway food  in central London. (Photo by Pietro Recchia/SOPA Images/LightRocket via Getty Images)
A Deliveroo courier rides along Regent Street delivering Takeaway food in central London. Photo: Pietro Recchia/SOPA Images/LightRocket via Getty Images

Deliveroo (ROO.L) shares continue to reel from its dire London stock market listing, crashing over 2% to 227p on Thursday after hedge fund Odey took a short position. 

The bet against the food delivery's share price was taken by James Hanbury and Jamie Grimston, fund managers at Odey — one of London's top hedge funds — the Financial Times reported. 

According to the newspaper, the position seems to have been taken on 31 March, the day Deliveroo debuted on the London Stock Exchange.  

Shares hit another record low on Wednesday after rival UberEats announced plans to expand into Germany. While the news doesn't have a direct impact on Deliveroo UK, shares declined nearly 20% to a low of 231p, extending total declines to over 40% below its listing price. 

The company had sold shares at 390p-a-piece in its initial public offering, valuing Deliveroo at around £7.6bn ($10.5bn). 

The food delivery company was expected to be one of the hottest listings of the year but has had a hard time mustering up interest since its initial public offering (IPO) announced in March. 

Shares in the company crashed as much as 30% on the day of its IPO, knocking £2bn off its value. 

Chart: Yahoo Finance
Chart: Yahoo Finance

Investors have said bankers overvalued the firm. Many organisations also expressed concerns about the company's constant losses and governance structure, which handed founder and chief executive, Will Shu continued control of the business even after it floated.

Several institutions including, Aviva (AV.L), L&G (LGEN.L), and M&G (MNG.L) all ruled out investing in the business before it floated.

Bankers and advisers that worked on the deal blame broader market conditions for the failure. Investors have been rotating away from tech stocks towards companies that are poised to do well as economies begin to reopen.

Those close to the float also claim short-sellers targeted the IPO, although public market disclosures have yet to back this up.

READ MORE: Deliveroo disappoints as it warns ordering boom set to fade

Last week Deliveroo posted strong first quarter results but said its outlook remained uncertain as COVID lockdown eases. 

The firm anticipates consumers may order less takeaways as outdoor restaurant areas have reopened.

Growth in the first three months of this year accelerated for the fourth consecutive quarter, with orders rising 114% year-on-year to 71 million and gross transaction value (GTV) increasing 130% to £1.65bn. 

Monthly active consumers grew 91% to average 7.1 million during the first quarter.

READ MORE: Deliveroo IPO stock flop raises questions for Goldman and JPMorgan

However the wider market pared some of the losses and have seen a boom in sales. 

On Wednesday, Domino's Pizza (DOM.L) revealed sales rose nearly a fifth over Q1 as demand for takeaways jumped during lockdown. Overall sales at the company surged 18.7% to £371.3m. 

Other food takeaway services have also seen an unprecedented surge in demand as the lockdown saw restaurants shuttered for most of the year.

In March, Takeaway platform Just Eat Takeaway (JET.L) reported that revenues rose by 54% to €2.4bn ($2.9bn,£2bn).

It said that it expected a "further acceleration" of growth in orders for 2021, with UK orders up 88% since the start of the year and delivery orders up over 600% compared with the first two months of 2020.

The company, which operates across Germany, Canada, the Netherlands, and parts of South America, said that it had delivered 179 million orders in the UK in 2020 alone.

Research from Barclaycard, showed ordering takeaways reached a record high during the period, up 32.6%, and online retail remained strong with a 73.2% rise, accounting for 54.9% of all retail spend last month.

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