Retail investors missing out on ‘first day pop’ from majority of IPOs

Danni Hewson
24 March 2021

•    The average increase between issue and opening price is 12% - £1,200 on an investment of £10,000
•    Deliveroo is unusual in being one of only a very few IPOs open to retail investors
•    Lockdown has seen the number of retail investors increase

Danni Hewson, financial analyst at AJ Bell, comments: 

“The news that its customers can get a slice of the Deliveroo pie when it’s floated on the London Stock Exchange sent many would-be investors rushing to order a takeaway. But this particular appetite might have as much to do with the novelty of retail investors being able to get in on the ground floor of this listing as the listing itself; after all the company might have mushroomed thanks to our lockdown appetites but it’s still failed to make a profit.

“There have been over 60 IPO’s (Initial Public Offerings) in the UK since the start of 2020.  Of those only a handful have been available to retail investors.  This is particularly galling as those primary listings often bring about a ‘first day pop’, an immediate increase in value*.  

First day pop

“Analysing all the London IPO’s from the start of 2018 to today you’ll find the average “pop” on the first day of dealing was 12%, a tasty return that’s been mostly denied to retail investors.  Many believe that initial increase in value can be artificially baked in, giving institutional investors an unfair advantage when it comes to making profit.  Companies listing for the first time want the buy in and it’s thought shares can be discounted by as much as 20% to fan the flames of attraction.

“Let’s put the potential prize into real money.  Imagine you bought £10,000 pounds worth of shares in ‘the average IPO’ you’d immediately see that investment swell by £1,200 before the first open trade on the market.  If you’d managed to purchase the same number of shares in the recent float of Cellular Goods Plc (CBX) that “pop” would have quadrupled your initial stake.  In that instance retail investors were invited to the party but only in a very limited capacity and the maximum total allocation available was £2,500.  

“Another well- known name, the online card store Moonpig (MOON) saw a 25.7% difference between the issue price and the opening price.  The Hut Group (THG) 20%; though in that case the online retailer might have disappointed investors if they’d got in and out with just the initial “pop”.  Those prepared to sit on their shares until after the first blush wore off would have seen the value shoot up after the company raised forecasts on several occasions.

“There are no guarantees in shares as in life. James Bond vehicle maker Aston Martin Lagonda (AML) had a shocking debut.  Sky high expectations came crashing down with a -4.5% jolt, a trend which has persisted to this day.  

Calls for a level playing field

“Amongst the recommendations in the recent Hill Review was a nod to making these public listings more public.

“You could ask why now?   Demand is the obvious answer.  As some lockdown winners found themselves with unusual amounts of spare cash the number of retail investors has shot up over the last twelve months.  Technology has also made markets more accessible.  Just a couple of reasons several major investment platforms including A J Bell have called for a levelling up of the investment playing field.   

“Primary Bid might be offering something of a workaround, but those small slices of opportunity only serve to whet the appetite further.  As with the Cellular Goods IPO the intermediary will share its slice of the Deliveroo pie amongst interested parties.  But it’s a very small slice and will undoubtedly be oversubscribed.  

“Would be investors should make sure it’s not just Deliveroo’s menus they’ve perused before parting with their cash, but at least they’ll get the chance to make that choice.”





Cellular Goods


The Barkby


Panther Metals


Ferro-Alloy Resources


Helium One Global


Aston Martin Lagonda


Wildcat Petroleum


Airtel Africa


Dev Clever




MGC Pharmaceuticals


Crossword Cybersecurity


Cornish Metals




Verici DX


Renalytix AI








Energean Oil & Gar





* ‘First day pop' is calculated as the difference between issue price on IPO and opening price on first day of dealing

** Average of all IPOs analysed since the beginning of 2018

Source: Morningstar / Shares. Includes IPOs from 2018 to 26 February 2021 excluding GDRs and VCTs.

Full table available on request

Danni Hewson
Financial Analyst

Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

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