Deliveroo Lowers Price Range For Landmark IPO

Matthew Broersma,
Deliveroo

Deliveroo targets low end of its price range for Wednesday IPO, amidst criticism over share structure and workers’ rights

Deliveroo is aiming for the bottom end of its planned IPO price range, amidst market volatility and a backlash by some of the world’s biggest institutional investors.

The Amazon-backed start-up said it would price its shares at £3.90 to £4.10, down from an earlier range of £3.90 to £4.60.

The shift places its projected market capitalisation at £7.6 billion to £7.8bn. Last week the company had said it expected a market capitalisation in the £7.6bn to £8.8bn range.

Deliveroo cited “volatile” market conditions, noting that four out of six US tech IPOs priced last week are now below their offer price.

city of london, shares, markets, stock exchangeTech ‘volatility’

But the change also follows criticism by large fund managers over Deliveroo’s business model and unusual dual-class share  structure, which is to give founder Will Shu more than 50 percent of voting rights.

“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,” Deliveroo said in a statement.

The company said the offer is covered multiple times throughout the range, led by “three highly respected anchor investors”, without offering further details.

Half of the tech IPOs in the US and the EMEA region priced in the bottom third of their announced ranges last week.

Deliveroo’s IPO on Wednesday is expected to be the biggest in London for a decade.

‘Investment risk’

But large fund managers including Legal & General, Aviva, Aberdeen Standard and M&G have all said they would not participate.

Criticisms by Aviva and M&G focused on Deliveroo’s reliance on self-employed workers, who aren’t paid benefits such as sick leave or paid holiday.

If Deliveroo is forced to reclassify its workers as employees, as was Uber earlier this month, the company could become an “investment risk”, said Aviva chief investment officer David Cumming.

James Anderson, manager of Scottish Mortgage, the UK’s largest investment trust, told the Times he was “lukewarm” about Deliveroo in spite of backing other food delivery platforms.

He cited the company’s focus on slower-growing markets and over-reliance on the “unusual” market conditions of London, where it is headquartered.

Others have said they are concerned that Deliveroo’s share structure would give Shu too much control over the company.

L&G said it would lobby the financial regulator against a proposed rule change that would allow companies with dual-class shares to list on premium indices such as the FTSE 100.