Deliveroo slashed the top valuation of its IPO on Wednesday by £ 1 billion, saying it would value its shares at the bottom of its guided range due to “volatile” market conditions.
The London Stock Exchange listing will now value the take-out delivery business at £ 7.6bn to £ 7.85bn, instead of a potential £ 8.8bn, after a week during which major fund managers said they would avoid Deliveroo amid concerns about workers’ rights.
Although the listing is still expected to be London’s biggest float for a decade, Legal & General and other investors have pointed to the potential for state intervention in the odd-job economy to affect Deliveroo’s business model. .
A strike and protests by Deliveroo runners on Sunday highlighted recent revelations that the company was indeed paying as little as £ 2 an hour.
The company is expected to announce the final price of its shares on Wednesday morning, but has reduced the range to £ 3.90 to £ 4.10 per share, down from £ 4.60.
A number of US tech stocks have also fallen below their issue prices after the first public offerings in recent weeks.
After regulatory concerns highlighted by L&G and others, including Aviva, sustainable investment manager EdenTree said on Monday it would boycott the IPO, saying Deliveroo’s model was “better characterized as a race to the bottom with employees primarily 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 offered.
A spokesperson said: “Deliveroo has received very strong demand from institutions around the world. The transaction is covered several times across the range, led by three highly respected benchmark investors.
“Given the volatile global market conditions for IPOs, Deliveroo chooses to responsibly price within the initial range and at an entry point that maximizes long-term value for our new institutional and retail investors.
The companies have also raised concerns about Deliveroo’s shareholding structure, which will allow founder and CEO Will Shu to have 20 votes per share, compared to one per share for other investors, which will give him a majority position in shareholder votes.
The company took advantage of restaurant closures for more than take-out during the Covid-19 crisis and revenues have skyrocketed.
The listing is expected to be the largest London IPO since Glencore in May 2011 and it will be the largest tech IPO on the London Stock Exchange, eclipsing the Hut Group last year and the 2015 listing of Worldpay Group, which has since been delisted.
While investors have voiced concerns over Deliveroo, another big odd-job company, Hermès, has reached a deal with the unions to raise tariffs.
The GMB union said around 20,000 couriers were entitled to paid vacation and a guaranteed minimum wage under the ‘independent plus’ deal with the delivery company in 2019.
Mick Rix, a GMB Country Manager, said: “Hermes continues to show other companies that looking after those who work for you isn’t just the right thing to do, it’s good for business.
“Couriers now have a real voice in their workplace.”
Martijn de Lange, Managing Director of Hermes UK, said: “An independent study shows that more than three quarters of our independent SE + couriers plus feel that their health and well-being has improved thanks to a paid vacation.”