Deliveroo has narrowed the price of its upcoming IPO despite investor demand outstripping the full deal size, citing market volatility.
The food delivery service previously said shares would be offered at £3.90-4.60 a pop, pushing the market capitalisation to up to £8.9bn.
However, shares will now go for £3.90-4.10, valuing the tech unicorn at £7.6-7.85bn once it joins the London Stock Exchange this week.
“Deliveroo has received very significant demand from institutions across the globe,” the firm was reported as saying by the FT.
“The deal is covered multiple times throughout the range, led by three highly respected anchor investors. 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.”
The loss-making company has been under fire for governance issues, with an investigation by The Bureau Local revealing that many workers were paid well below the legal minimum wage.
— The Bureau Local (@bureaulocal) March 25, 2021
Some of the UK’s largest investment firms including Aviva, BMO Global, CCLA, Aberdeen Standard, Hargreaves Lansdown, Rathbones and Legal & General all said they would not invest in the company for ethical reasons.
“As long-term investors, we’re looking to invest in businesses that aren’t just profitable but are sustainable. Employee rights and employee engagement are an important part of that,” said Andrew Millington, the head of UK Equities at Aberdeen Standard, part of Standard Life Aberdeen PLC (LON:SLA), last week.
“We will not be taking part in the Deliveroo IPO as we are concerned about the sustainability of the business model, including but not limited to its employment practices, and also the broader governance of the business.”
On Sunday, the Independent Workers’ Union of Great Britain (IWGB), alongside ShareAction and The Private Equity Stakeholder Project, released a full investor briefing outlining what they deem financial and reputational risks associated with buying Deliveroo shares.
The IWGB also called riders to go on strike on April 7, although Deliveroo said it doesn’t represent the majority of its workers, according to Reuters.
It also noted that MPs from all parties have been backing its demands, with an Early Day Motion supporting the union’s #ClappedAndScrapped campaign gathering another 65 MPs calling for an overhaul of Deliveroo’s terminations process.
“Deliveroo riders are playing a critical role during the COVID-19 pandemic but the company treats them as disposable,” said Jim Baker, Executive Director at Private Equity Stakeholder Project.
“Given its competitors’ moves away from a gig-based workforce, Deliveroo faces substantial reputational risk in failing to adequately address riders’ concerns.”
Earlier this month Uber Technologies Inc (NYSE:UBER), another big player in the so-called gig economy, re-classified 70,000 of its UK drivers as workers after a UK Supreme Court ruling in February.