Deliveroo dampens IPO expectations as investors raise workers' rights concerns

Deliveroo has said it will price shares for its stock market listing on Wednesday towards the bottom of its price range due to “volatile” market conditions.

It comes after a week in which a number of leading fund managers said they would reject the listing – which is expected to be the biggest on the London Stock Exchange for a decade – amid concerns over workers’ rights.

The takeaway delivery firm is set to announce its final pricing on Wednesday morning but has narrowed its share price range to between £3.90 and £4.10 a share.

Last week, the company said it intended to offer a range of between £3.90 and £4.60 a share, which could have potentially valued the business up to £8.8bn. It said it now expected it would be valued at between £7.6bn and £7.85bn.

The decision to offer towards the lower end of its price range comes after a number of US tech stocks fell below their issue prices after initial public offerings (IPOs) in recent weeks.

Last week, some of the UK’s largest fund managers, including Legal & General and Aviva, said they would reject the flotation, highlighting issues related to its business model, workers’ rights and regulatory concerns.

Despite these concerns, Deliveroo on Monday said investor demand exceeded the number of shares on offer.

A Deliveroo spokesperson said: “Deliveroo has received very significant demand from institutions across the globe.

“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.”

Firms have also raised concerns over the Deliveroo share structure, which will see the founder and chief executive, Will Shu, have 20 votes a share, compared with one a share for other investors, giving him a majority position at shareholder votes.

Deliveroo has opted not to pursue a premium listing, which allows Shu to retain these enhanced shareholder rights. This rules it out of inclusion in the FTSE indices.

The company has benefited from the closure of restaurants for anything other than takeaways during the Covid-19 crisis and revenues have soared, with so-called gross transaction value – which measures the total value of orders received – rising 64.3% in 2020 to £4.1bn.

The listing is set to be London’s biggest IPO since Glencore in May 2011 and it will be the biggest tech IPO on the LSE, dwarfing the Hut Group last year and the 2015 listing of Worldpay Group, which has since delisted.

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