Amazon-backed Deliveroo was forced to slash its IPO price early on Monday after a wave of backlash concerning worker rights.
Amazon usually backs a winning horse, but it will be eyeing up Deliveroo’s impending initial public offering (IPO) on the London Stock Exchange with some anxiety.
Following weeks of build-up and the potential of an PS8.8 billion ($12.2 billion) valuation, investor backlash could now cost the company billions.
What is Deliveroo’s new IPO price?
The food delivery company announced on Monday that it has revised its offering share price to between PS3.90 ($5.40) and PS4.10 instead of the PS3.90 to PS4.60 range originally planned. This would indicate a valuation of 7.6 billion pounds ($10.46 billion).
When will Deliveroo IPO?
There is no set date yet but analysts expect Deliveroo to IPO on the London Stock Exchange in early April 2021, with whispers of April 7 doing the rounds.
Why has Deliveroo cut its IPO price?
There are two reasons for this:
1. Worker conditions
An investigation by the Workers’ Union for Great Britain unveiled findings last week that some Deliveroo ‘riders’ — delivery personnel — can earn less than PS2 an hour, while CEO Will Shu could net close to half-a-billion pounds in the IPO.
The backlash following this report has not been negligible, with several large investors threatening to pass on buying shares when they are made public, including Aberdeen Standard and Aviva, which manage over PS800 billion between them.
Gig economy workers’ rights have been a sore point throughout food delivery and ride-sharing for years now, and the ever-changing nature of the space could be a massive bear case for Deliveroo, which brings us to the next reason…
2. Gig economy issues and share structure concerns
The U.K.’s largest fund manager, Legal and General Investment Management, has announced that it will likely pass on the much-anticipated IPO.
“We are unlikely to participate in the IPO via our active or index funds,” a spokesperson for Legal and General revealed on Friday, before elaborating:
“We see increasing signs of countries and governments reviewing the gig economy status. We take our role as a responsible steward of our clients’ capital very seriously and engage with a number of companies in this sector on ESG concerns, like the rights of employees and proposed share class structures.”
As well as that, Will Shu’s more than 50% voting rights appear to have spooked potential investors who are not comfortable with the CEO holding so much power.
What about Amazon?
There has been no word from Amazon, which owns a 15.8% stake in Deliveroo following a $575 million investment in 2019, but this latest venture into a previously untapped space for the business — food delivery — could well be a miss rather than a hit.
You can read more about Deliveroo’s impending IPO here.
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