Deliveroo, the London-based Amazon-backed food delivery service, announced on Monday morning (March 29) that its shares are now expected to be priced at £3.90 – £4.10, down from the £4.60 that the company had previously announced at the upper end, as CNBC reported. This brings the high end of the company’s expected valuation down to £7.8 billion, a full billion-pound decrease from the previous £8.8 billion, as the company gears up for its London initial public offering (IPO).
Discussing this downgrade, a Deliveroo spokesperson said, “Deliveroo has received very significant demand from institutions across the globe,” per a Reuters report. “Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximizes long-term value for our new institutional and retail investors.”
Despite this statement, it seems likely that the change comes in large part from the recent wave of public attention on the company’s labor practices. A recent Bureau of Investigative Journalism survey of more than 300 Deliveroo riders found that wages can run as low as £2 ($2.76) an hour. This practice is enabled by the fact that the company classifies its riders as self-employed, circumventing minimum wage requirements. Consequently, the union has stated its intentions to hold a strike on April 7, the day of the company’s public offering, reports the Independent.
A “Deliveroo investor briefing” — created jointly by the Independent Workers’ Union of Great Britain (IWGB), the Private Equity Stakeholder Project and ShareAction, an organization that advocates for “responsible investment,” was released on Sunday (March 28). The briefing advises that “the Covid-19 crisis has brought to the forefront significant issues that face Deliveroo riders, which include low pay, insecure work, safety concerns and widespread discontent.” It asks investors for “engagement with Deliveroo and its ownership around the legal employment status of riders and a minimum standards guarantee.”
In the release announcing the briefing, one Deliveroo rider said, “I cannot rely on Deliveroo for 100 percent of my income. I’ve worked throughout the pandemic and it’s difficult to make ends meet. Deliveroo’s hiring more people and endlessly driving our income down. It doesn’t care about the financial security or basic rights of its riders and shamelessly claims the workforce is largely casual. We will not let them take us for a ride.”
Concerns have also been raised about the company’s ownership structure. According to CNBC, Legal and General Investment Management, the country’s largest fund manager, stated that it would likely not participate in the IPO, pointing out that, per Deliveroo’s share ownership structure, the company’s CEO will retain more than half of the voting rights.
“We see increasing signs of countries and governments reviewing the gig economy status,” a spokesperson for the fund manager told the publication. “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.”
In response to the recent widespread attention on Deliveroo’s business model, a spokesperson told Reuters, “Thousands apply to work with us every week, reflecting the strong demand for our on-demand model.”
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