The opportunity to invest in a company with which you’re familiar and with which you’re a customer is an exciting prospect. Here are our thoughts on whether you should invest.
We think Deliveroo’s decision to open up their IPO to customers and delivery drivers/riders is admirable. An IPO, or initial public offering, is the process of a private company becoming public. A private company is one in which you typically can’t invest in and is usually owned by the original founders plus some early backers. A public company is one that anyone can own, by buying shares on the stock exchange. Investing at the IPO stage means buying into the company just before it goes live on the stock exchange and the shares begin to be bought and sold by the public.
Access to an IPO is normally restricted to professional and institutional investors, with only rare exceptions where the broader public can directly take part. We therefore think Deliveroo’s decision is a financially democratic one which enfranchises the broader public in the capital markets.
That doesn’t make Deliveroo a good investment. A good company (if indeed Deliveroo is one) isn’t always a good investment, and the fact that IPOs are usually exclusive doesn’t mean that you’re any more likely to make money than if you just bought the shares later on the exchange like any other member of the public.
Having said that, whether you think Deliveroo itself is a good investment is actually of secondary importance. Far more important is whether an investment in any one individual stock – especially in an early stage of the company’s life – is appropriate for you. The minimum investment in the Deliveroo IPO is £250 and the maximum is £1000. We don’t have any problem with you investing as long as:
- The amount you invest is not a large proportion of your overall wealth
- You wouldn’t be upset if the value of your investment fell by 50% on the first day the stock goes live on the exchange (yes, it can happen)
- You don’t need to make money from the investment
- You don’t need your money back in the foreseeable future
As we’ve said before, investing is like your diet. It’s not all about nutrition and cost; you’re allowed to actually enjoy it along the way. But maintaining a balance is as crucial for your financial health as it is for your physical and mental health. Are you someone who can imagine spending £250 on a shopping trip to buy new clothes? Then investing £250 in something that you find interesting is probably appropriate for you. It is fun to be part of the journey of a company that you feel associated with; you might get free products and other perks, and ordering a takeaway might feel less naughty when you own the delivery company.
The experience alone can be worth paying money for, and it can even be a learning opportunity. But your financial safety is important, and your friends, colleagues, and fellow social media users have different financial characteristics to you, so think about whether it is an appropriate investment for you, not whether Deliveroo is a good investment at all.
If you ask yourself the right question, you’ll probably work out for yourself whether you should invest in the Deliveroo IPO.
If you have any questions please comment on the article or send us an email using the contact form. If it’s your first time on the site then please have a look around and get in touch if there’s anything more we can help with
To the pound 