- The Deliveroo debut was not a winner for T. Rowe Price, but it was not a long-term disaster either.
- This asset manager is in excellent financial shape and is an S&P 500 Dividend Aristocrat.
- The stock is only slightly overvalued at this time.
T. Rowe Price (NASDAQ:TROW) cannot have been happy with how the IPO debut of British food delivery firm Deliveroo (OTCPK:DROOF) went on 03/31/2021. However, this episode should not dissuade prospective investors from T. Rowe Price itself as a prospective investment.
The Deliveroo debacle – already being called one of the worst London stock market debuts ever – saw shares fall in price by 30% within the first half-hour of trading, and has yet to come close to its offer price of 390GBx ($5.43) per share since. All told, £2 billion ($2.7 billion) of Deliveroo’s market capitalization was destroyed as a result.
How has this hurt T. Rowe Price, you ask? Not as much as some headlines may make you think, actually. The venerable asset manager is one of Deliveroo’s largest institutional investors, with 0.19% of shares held (3,330,028 shares) and 0.18% of assets. Only Fidelity Management Trust Co. has a higher stake with 0.54% of total shares held (9,239,952 shares) and 0.41% of assets. While T. Rowe Price cannot have been happy with how Deliveroo performed, its investment in the food delivery firm is not going to crater its own business.
After all, the essential business is doing well. There has been concern over the years that there is a trend towards investors taking a more hands-on approach to their investments rather than delegating them to asset managers like T. Rowe Price. The rise of passive ETFs which do not charge fees is a particular risk for active asset managers which do charge fees. However, these concerns do not seem to afflict T. Rowe Price.
Passive ETFs have been around for several years now, and yet the last five years of revenue and net income figures strongly suggest that T. Rowe Price’s profitability has not been dented by their existence.
