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Deliveroo’s IPO tanks driven by concerns over treatment of workers

Food delivery platform Deliveroo’s shares tanked in its highly anticipated London initial public offering after fund managers raised concerns about the company’s governance and working conditions for its couriers.

The IPO valued Deliveroo at £7.6 billion ($13.8 billion) but its shares on Wednesday evening finished 26 per cent down from their debut price of 390p, a price that had already been cut after several fund managers sat out the listing.

Deliveroo has not turned a profit since it was founded in 2013 even though a boost to food delivery platforms last year from the coronavirus pandemic helped narrow its annual loss to £223.7 million.

Deliveroo’s Australian head Ed McManus said he expected post pandemic demand to continue.

Deliveroo’s Australian head Ed McManus said he expected post pandemic demand to continue. Credit:Arsineh Houspian

Nick Healy, analyst at Wilson Asset Management, said the concerns about Deliveroo’s treatment of its workers were also relevant in Australia. “Deliveroo, and the food delivery space in general, poses concerns on the treatment of employees,” he said. “It’s certainly something we would keep in mind, both from an ethical perspective but also from the fact that labour is a significant cost, and regulatory impact could be material.

“From a business model perspective this will affect both margins and competitiveness,” Mr Healy said.

In the United Kingdom, the Supreme Court ruled that Uber drivers are workers and not independent contractors. The ruling is already having ramifications in Australia with the Transport Workers Union citing the judgment in a hearing before the workplace tribunal to bolster its argument that Deliveroo riders are employees.

Deliveroo’s flop on debut contrasted to the 86 per cent surge posted by its competitor DoorDash on its IPO in New York just a few months earlier.

Mr Healy put this down to the divide between Europe and the United States for technology listings. “We’re seeing many US tech stocks moving up heavily post IPO, and even being priced aggressively before the move,” he said. “There could be an element of Deliveroo being UK listed, with more of a European investor base.”

Wilson Asset Management did not participate in the IPO because of its concerns about Deliveroo’s workers and the company’s governance, and institutional investors Aberdeen and BMO Global Asset Management also sat the listing out raising similar issues.

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