The Raspberry Pi IPO is a critical moment for UK capital markets. This is an opportunity to bring excitement back to the market. 

We cannot afford to have the IPO window slammed shut by another Deliveroo-style situation, which many called “the worst IPO in history”.

Its market debut was, by many metrics, a huge success, with shares rising from an initial price of 280p to highs of 392p in early trading. The question now is whether this is something of a high-water mark for the stock, or just an indicator of what is to come. 

Anyone who has bought into the low-cost computer maker will hope it is the latter, as will the London market in general, which for some time has been desperate for some good news to shout about.

The opening day of an IPO is rarely uneventful, but neither is it always indicative of the long-term prospects of a stock. Deliveroo’s opening day of trading saw 26% wiped off its share price; just four months later it was back near the IPO price. Now, almost three years later, it is priced at barely a third of its previous high. 

So what happened? And how can Raspberry Pi avoid a similar situation?

There are of course several key differences between then and now, but I would still encourage the leadership team to look carefully at Deliveroo and heed a couple of key lessons.

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Firstly, feedback from all types of investors is important. In hindsight, Deliveroo’s team would have benefited from more direct lines of communication with investors. They may have been able to identify much earlier on that the price wasn’t right for everyone or that their after-market support wasn’t as stable as they initially believed.

The most upfront, honest and unconflicted conversations will be those that happen directly with the company. There are many channels and tools for a listed company to engage directly with the market.

Don’t become too reliant on any third party. I would encourage the team at Raspberry Pi to target a broad spectrum of investors. Once they have commenced full trading on Friday (14th June 2024), everyone will be able to buy and sell shares. As was the case with Deliveroo, even the most ‘loyal’ institutional investors can quickly become sellers. The marginal buyer or seller is more likely to be someone they have not spoken with before. 

Converting those that have seen day one success into long-term investors is not easy, but should be the goal.

After-market support will come from retail investors. Most IPO books are heavily oversubscribed – it’s part of the marketing. This doesn’t necessarily mean that there is an enormous amount of latent demand that will translate to on-market buying. For companies like Raspberry Pi, there will be a large contingent of retail investors who have not been able to access the IPO prospectus that should be engaged from the outset of the listing. 

Investing, for individuals managing their own money, is often an emotional decision where relationships and trust are as important as earnings and figures. Treating your investors in the same careful and active way that customers are treated is a good first step to ensuring that they feel connected to the company, understand the vision, and buy into management. 

This listing could be a turning point for London markets, but the job is not done yet; in fact, as for all listed businesses, the IPO is just the start.

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