If a week is a long time in politics then three days look a lifetime in the world of flotations, if Deliveroo’s experience is any guide.
On Monday, the food delivery app developer announced a price range of 390p to 460p, indicating an initial market capitalisation of £7.6bn to £8.8bn for the loss-making company.
That was about a billion quid more than the market had previously been expecting, which suggested the City was very keen to get its hands on the stock.
Three days later, we know not everyone in the City is wild about Deliveroo and it’s not just because the runway to profitability is a long one.
Surprisingly (to some), several fund management firms appear to have serious misgivings over the plight of those who put the deliver into Deliveroo.
BMO Global Asset Management became the latest asset manager on Thursday to get the barge pole out and announce it would not be investing in the flotation, joining Aviva Investors and Aberdeen Standard Investments on the sidelines, both of whom have expressed disquiet over the company’s employment practices.
“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,” stated Andrew Millington, the head of UK Equities at Aberdeen Standard, part of Standard Life Aberdeen PLC (LON:SLA).
“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,” Millington said.
A survey by the Bureau of Investigative Journalism has found that a third of the riders whose data it collected were receiving less than the minimum wage.
READ Deliveroo riders can earn as little as £2 an hour during shifts, as boss stands to make £500mln
The bureau analysed thousands of invoices from more than 300 riders over a period of more than a year and determined that one in three made on average less than £8.72 an hour, which is the national minimum wage for persons over the age of 25.
A cyclist in Yorkshire was logged in for 180 hours and was paid the equivalent of £2 per hour. It truly can be grim up north.
Deliveroo’s get-out clause is that Deliveroo riders are classed as “self-employed”, so the requirement to pay a minimum wage does not apply.
“Deliveroo riders have the complete freedom to choose when and where to work and can choose which deliveries to accept and which to reject. 50,000 riders choose to work with Deliveroo, and thousands more people apply to work with us every week,” the company told the Bureau of Investigative Journalism (BoIJ).
“Our way of working is designed around what riders tell us matters to them most – flexibility... Riders in the UK are paid for each delivery they choose to complete and earn £13 per hour on average at our busiest times. We communicate with thousands of riders every week and satisfaction is currently at an all-time high,” it claimed.
That assertion cut little ice with the Independent Workers’ Union of Great Britain (IWGB), a union that represents those working in the gig economy.
“It’s deplorable that Deliveroo has continued even through a pandemic to exploit key workers for as little as £2 per hour,” said Henry Chango-Lopez, the general secretary of the IWGB.
“This is why it has become the world’s most protested platform and faces a rising tide of litigation and industrial action in almost every country where it operates. In the UK there were 16 strikes self-organised by Deliveroo riders September 2019 alone. Riders last took strike action in Sheffield on 25 November and anyone investing in its exploitative business model should expect more public pressure and worker-led action until their rights are respected,” Chango-Lopez.
The discrepancy between Deliveroo’s claims of workers earning £13 an hour on average at peak times and the BoIJ’s findings that more than half the workers earn less than £10 an hour has raised concerns at Pensions & Investment Research Consultants (PIRC), the corporate governance and shareholders’ rights pressure group.
“Investors considering taking a position in Deliveroo should familiarise themselves with these matters and the risks and responsibilities involved along with all other relevant factors. Challenges to the current employment model are financially material,” declared Tom Powdrill, the head of stewardship at PIRC.
In its flotation prospectus in the section on risks relating to its business, the company said “Our 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”.
“The independent contractor status of riders, which applies in most of the jurisdictions in which we operate, has been and continues to be the subject of challenge in certain markets, including in our key markets,” Deliveroo warned.
“Consistent with other operators in the gig economy, we have been and are involved in legal proceedings, including individual and collective legal claims and investigations, audits or claims by labour, social security, pension and/or tax authorities, under which it is claimed, amongst other things, that riders are (or have in the past been) engaged as employees (or, where applicable, as workers or quasi-employees), rather than as independent contractors. We are engaged in such proceedings in a number of the countries in which we operate including the United Kingdom, France, Spain, the Netherlands, and Italy.
“Governments and government agencies in Australia, the Netherlands, Spain, and Italy are investigating or challenging the current and/or historic basis on which riders have been engaged in those countries,” it added.
Deliveroo has successfully argued its case in two High Court battles that its couriers are not employees but it looks likely that the challenges will keep on coming.
Conditional dealing in the shares issued via the initial public offering will start on March 31 while full dealing is set to start on April 4.