Deliveroo lowers valuation target amid investor concerns over riders

Investor concern over how Deliveroo treats its drivers has led the food delivery firm to lower its company valuation target from its London stock market listing this week.

Food-delivery company Deliveroo has cut the upper valuation target from its London stock market listing, this week, by about £950m (€1.1bn), after some institutional investors balked at the company’s treatment of its delivery bike riders.

Deliveroo set new opening price guidance of £3.90 to £4.10 a share. The company initially marketed the offering at £3.90 to £4.60, valuing it at as much as £8.8bn. A Deliveroo spokesperson said the adjustment lowered the top end of the valuation target to £7.85bn (€9.1bn).

Some of the UK’s biggest asset managers said last week they’re concerned the London-based company’s treatment of couriers isn’t aligned with socially responsible investing practices.

Hundreds of riders are expected to refuse to make deliveries when the shares begin trading on Wednesday. Some investors also have expressed concern that the company’s dual-class voting structure is counter to good corporate governance.

“At the bottom of the range, Deliveroo’s value seems to balance the risks and rewards from the hard work it has to do over the near term,” said Patrick Basiewicz, an analyst at UK broker finnCap. 

We do not expect it to be easy.

Deliveroo said in its IPO prospectus that its business “would be adversely affected if our rider model or approach to rider status and our operating practices were successfully challenged or if changes in law require us to reclassify our riders as employees.” 

Such challenges are gaining ground. Uber Technologies, which runs the competing Uber Eats service, said this month it will reclassify its 70,000 UK drivers as workers, entitling them to the minimum wage and vacation pay. The announcement came after it lost a landmark ruling in the country’s Supreme Court in February.

“Deliveroo has received very significant demand from institutions across the globe,” a Deliveroo spokesperson said, adding that there is demand for the offering, multiple times over, throughout the price range led by three anchor investors.

The sale totalled as much as £1.77bn based on the original price range, with £1bn of proceeds for the company and the rest of the offering coming from investors including Amazon.

Deliveroo is giving founder and chief executive Will Shu voting control for three years.

Bloomberg