By Samuel Indyk
Investing.com – Some of the UK’s largest asset management companies have said they will not invest in Deliveroo’s upcoming IPO because of concerns over workers’ rights.
The food delivery company plans to go public next month on the London Stock Exchange and expects to be valued at around £8bln when it lists.
Asset management companies
Aviva (LON:AV) Investors has raised concerns about the rights of the self-employed riders as they do not receive the minimum wage, sick leave, or holiday pay.
“A lot of employers could make a massive difference to workers' lives if they guaranteed working hours or a living wage, and how companies behave is becoming more important,” said Aviva’s Chief Investment Officer David Cumming on the BBC’s Today Programme. “We won't be investing in Deliveroo for a number of reasons but that is one of them.”
Aberdeen Standard Investments, another large UK asset management firm, has echoed these comments.
“We wouldn’t be comfortable that the way in which its workforce is employed is sustainable,” said the firm’s head of UK equities Andrew Millington.
Uber (NYSE:UBER) ruling
The setback for Deliveroo comes following a recent ruling by the UK Supreme Court stating that its drivers are workers, rather than self-employed, giving them access to certain employment rights. Uber has said that it will now guarantee its drivers a minimum hourly wage, holiday pay and pensions.
If Deliveroo was forced to follow suit and reclassify its riders as employees, that could further hamper the business.
“It's an investment risk if the legislation changes," said Cumming.
However, it is worth noting that the Supreme Court ruling only impacts Uber’s drivers and not delivery riders in its Uber Eats business.
“If Deliveroo is forced to change the way it classifies its riders in the future, it is likely to puncture its profits prospects, and could even derail the delivery giant," said Hargreaves Lansdown (LON:HRGV) analyst Susannah Streeter.
Deliveroo has played down reports that the business model may have to change.
“We are confident in our business model, which has been upheld by UK courts three times, including the High Court twice,” said a spokesman for the company.
Amazon Investment
Amazon (NASDAQ:AMZN) is one of the larger shareholders in the company, currently holding a 15.8% stake, however that is scheduled to fall to 11.5% when the company goes public via its IPO.
Shares in the community offer will start trading a week after the stock market debut, when "unconditional" trading begins on April 7, while, institutional investors can begin trading the shares on March 31, the IPO prospectus stated.