Loss-making delivery company Deliveroo has warned that it might have to re-draw its business model if it is forced to change the status of its delivery riders.
The group published details of its £8bn IPO in London yesterday with the prospectus flagging up regulatory probes in Britain, France, Spain, Italy and the Netherlands over how it employs its delivery couriers.
Having to provide riders with holiday and sick pay, minimum wages and other benefits would mean significant changes to the way it operates, the document stated.
“Riders partner with us for the freedom to work when, where and how frequently they want,” it said in the prospectus.
“Changes to laws governing the classification of independent contractors, or judicial or governmental decisions involving us or our competitors regarding independent contractor classification, could require us to consider classifying riders as employees.”
Uber recently lost a landmark case in the UK that saw the taxi service provider re-classify 70,000 UK drivers as employees entitling them to legal rights such as a minimum wage, holiday pay and a pension.
Deliveroo said its delivery riders are contractors paid by the number of trips they make and added it has defended this position so far in the UK and elsewhere, though it is under challenge in a number of key markets.
Italy recently ruled against the company and said it should backdate benefits for riders from 2015 up until 2020 but Deliveroo is appealing this judgment. If it loses the costs would be 'material', it added.
Deliveroo announced the price of its IPO yesterday in a range of 390-460p giving a value of between £7.6bn to £8.8bn.
Neil Wilson, at markets.com, said it was a higher value than expected and makes it the biggest IPO in London for some time.
“Deliveroo said the total value of transactions (GTV) were up 121% year on year in January and February.
“This marks a significant acceleration from the +64% growth run rate through 2020 and indicates that the £5bn estimated GTV in 2021 could be easily exceeded".
GTV is defined as the total value paid by consumers, excluding any discretionary tips.
The food delivery service has made £50mln of shares available as part of a ‘community offer’ through PrimaryBid.
In 2020, Deliveroo an underlying loss of £223.7mln which was down from a 317.3mln loss in the prior year.
The total amount of transactions processed on its platform soared 64% to £4.1bn as takeaways became a popular buy during lockdowns.