Oscar Williams-Grut·Senior City Correspondent, Yahoo Finance UKMon, 29 March 2021, 8:51 am·2-min read
Deliveroo is set to price its initial public offering below the top end of its range, following a revolt from the City of London over the company’s treatment of drivers.
Deliveroo is set to announce the final pricing of its hotly anticipated IPO on Tuesday. The food delivery startup previously set a range of £3.90 to £4.90, valuing the business at between £7.6bn and £8.8bn.
The loss-making startup said on Monday it was narrowing its share price range to between £3.90 and £4.10, citing “volatile” market conditions. The new range gives the company a market cap range of between £7.6bn and £7.85bn.
“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,” a spokesperson said.
The decision to lower its potential valuation comes amid a revolt among institutional investors over the company’s treatment of drivers. Several of the City of London’s biggest money managers — including Aviva (AV.L), Aberdeen Standard Life (SLA.L), L&G (LGEN.L), and M&G (MNG.L) — have publicly said they will not take part in Deliveroo’s IPO.
Money managers have cited concerns over Deliveroo’s treatment of drivers. Deliveroo’s platform allows anyone to sign up as a rider to deliver food for restaurants. Analysis published last week by the Bureau for Investigative Journalism claimed that riders can earn as little as £2 an hour on the platform, well below minimum wage. Deliveroo disclosed in its IPO documents that it is facing legal claims or regulatory probes across Europe over the classification of its riders.
Deliveroo downplayed the importance of the recent investor revolt in the narrowing of the price range.
“Deliveroo has received very significant demand from institutions across the globe,” a spokesperson said. “The deal is covered multiple times throughout the range, led by three highly respected anchor investors.”
The decision to cut back the range comes as recently tech IPOs in both the US and Europe have faced headwinds. Several US floats priced last week were below their initial offer prices and Trustpilot, one of the UK’s highest profile floats this year, sank below its IPO price on the second day of dealing.