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Deliveroo dampens IPO expectations as investors raise workers' rights concernsTakeaway delivery firm says it will price shares towards bottom of planned range
A Deliveroo protest on Sunday highlighted the fact that the company was effectively paying some riders as little as £2 an hour.
Photograph: Toby Melville/Reuters
Gwyn Topham
@GwynTopham
Mon 29 Mar 2021
Deliveroo has cut the upper valuation of its landmark flotation on Wednesday by £1bn, saying it will price its shares at the bottom of its guided range because of “volatile” market conditions.
The London stock market listing will now value the takeaway delivery firm at £7.6bn-£7.85bn, instead of a potential £8.8bn, after a week in which leading fund managers said they would shun Deliveroo amid concerns over workers’ rights.
Although the listing is still expected to be London’s biggest float for a decade, Legal & General and other investors highlighted the potential for state intervention in the gig economy to affect Deliveroo’s business model.
UK's biggest fund manager expected to shun Deliveroo float
A strike and protest by Deliveroo riders on Sunday underlined recent disclosures that the firm was effectively paying some as little as £2 per hour.
The firm is set to announce its final share pricing on Wednesday morning but has narrowed the range to between £3.90 and £4.10 a share, instead of up to £4.60.
A number of US tech stocks have also fallen below their issue prices after initial public offerings in recent weeks.
After the regulatory concerns highlighted by L&G and others including Aviva, the sustainable investment manager EdenTree indicated on Monday that it would boycott the IPO, saying Deliveroo’s model was “best characterised as a race to the bottom with employees in the main treated as disposable assets – which is the very antithesis of a sustainable business model”.
Despite these concerns, Deliveroo said on Monday that investor demand exceeded the number of shares on offer.
A spokesperson said: “Deliveroo has received very significant demand from institutions across the globe. The deal is covered multiple times throughout the range, led by three highly respected anchor investors.
“Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”
Firms have also raised concerns over the Deliveroo share structure, which will result in the founder and chief executive, Will Shu, having 20 votes a share, compared with one a share for other investors, giving him a majority position at shareholder votes.
The company has benefited from the closure of restaurants for anything other than takeaways during the Covid-19 crisis and revenues have soared.
The listing is set to be London’s biggest IPO since Glencore in May 2011 and it will be the biggest tech IPO on the London Stock Exchange, dwarfing the Hut Group last year and the 2015 listing of Worldpay Group, which has since delisted.
While investors expressed concerns about Deliveroo, another big company in the gig economy, Hermes, reached an agreement with unions to increase rates.
The GMB union said about 20,000 couriers were getting the right to paid holiday and guaranteed minimum pay under the “self-employed plus” deal struck with the delivery firm in 2019.
Mick Rix, a GMB national officer, said: “Hermes is continuing to show other companies that looking after those who work for you is not just the right thing to do, it’s good for business.
“Couriers now have a real voice in their workplace.”
Martijn de Lange, chief executive of Hermes UK, said: “Independent research shows that over three-quarters of our SE+self-employed-plus couriers believe that their health and wellbeing has improved as a result of having paid holidays.
Gwyn Topham
@GwynTopham
Mon 29 Mar 2021
Deliveroo has cut the upper valuation of its landmark flotation on Wednesday by £1bn, saying it will price its shares at the bottom of its guided range because of “volatile” market conditions.
The London stock market listing will now value the takeaway delivery firm at £7.6bn-£7.85bn, instead of a potential £8.8bn, after a week in which leading fund managers said they would shun Deliveroo amid concerns over workers’ rights.
Although the listing is still expected to be London’s biggest float for a decade, Legal & General and other investors highlighted the potential for state intervention in the gig economy to affect Deliveroo’s business model.
UK's biggest fund manager expected to shun Deliveroo float
A strike and protest by Deliveroo riders on Sunday underlined recent disclosures that the firm was effectively paying some as little as £2 per hour.
The firm is set to announce its final share pricing on Wednesday morning but has narrowed the range to between £3.90 and £4.10 a share, instead of up to £4.60.
A number of US tech stocks have also fallen below their issue prices after initial public offerings in recent weeks.
After the regulatory concerns highlighted by L&G and others including Aviva, the sustainable investment manager EdenTree indicated on Monday that it would boycott the IPO, saying Deliveroo’s model was “best characterised as a race to the bottom with employees in the main treated as disposable assets – which is the very antithesis of a sustainable business model”.
Despite these concerns, Deliveroo said on Monday that investor demand exceeded the number of shares on offer.
A spokesperson said: “Deliveroo has received very significant demand from institutions across the globe. The deal is covered multiple times throughout the range, led by three highly respected anchor investors.
“Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”
Firms have also raised concerns over the Deliveroo share structure, which will result in the founder and chief executive, Will Shu, having 20 votes a share, compared with one a share for other investors, giving him a majority position at shareholder votes.
The company has benefited from the closure of restaurants for anything other than takeaways during the Covid-19 crisis and revenues have soared.
The listing is set to be London’s biggest IPO since Glencore in May 2011 and it will be the biggest tech IPO on the London Stock Exchange, dwarfing the Hut Group last year and the 2015 listing of Worldpay Group, which has since delisted.
While investors expressed concerns about Deliveroo, another big company in the gig economy, Hermes, reached an agreement with unions to increase rates.
The GMB union said about 20,000 couriers were getting the right to paid holiday and guaranteed minimum pay under the “self-employed plus” deal struck with the delivery firm in 2019.
Mick Rix, a GMB national officer, said: “Hermes is continuing to show other companies that looking after those who work for you is not just the right thing to do, it’s good for business.
“Couriers now have a real voice in their workplace.”
Martijn de Lange, chief executive of Hermes UK, said: “Independent research shows that over three-quarters of our SE+self-employed-plus couriers believe that their health and wellbeing has improved as a result of having paid holidays.
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