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LONDON – Food delivery start-up Deliveroo has cut the price of its shares ahead of its IPO on the London Stock Exchange.
The Amazon-backed company announced Monday that it will now sell shares for £ 3.90 ($ 5.40) to £ 4.10 apiece, instead of £ 3.90 to £ 4.60 apiece. As a result, Deliveroo’s market cap will be between £ 7.6bn and £ 7.8bn instead of between £ 7.6bn and £ 8.8bn.
It comes after several major investors announced they would avoid Deliveroo’s IPO on April 7 because of the company’s employee rights and share ownership structure, giving CEO Will Shu over 50% of the voting rights.
The UK’s largest fund manager, Legal and General Investment Management, which manages over £ 1.3 trillion in assets, said it is unlikely to be involved, citing concerns about the gig economy Deliveroo operates in and the company’s share ownership structure. Aberdeen Standard and Aviva Investors, who manage over £ 800 billion, have voiced concerns about Deliveroo’s labor rights, while M&G Investments plans to skip the IPO as well.
It also comes after the Independent Worker’s Union for the UK pointed out that some of Deliveroo’s drivers can make less than £ 2 an hour, while Shu should bring in as much as £ 530 million on its IPO.
Deliveroo dismisses allegations that it improperly treats its drivers, saying that its platform gives them the flexibility to work when they want, as does rivals like Just Eat and UberEats. It is said that during the busiest times, drivers make an average of £ 13 an hour.
Deliveroo has offered to pay loyal couriers a bonus of between £ 200 and £ 10,000 on its IPO, with an average payout of £ 440. However, angry drivers went on strike in London on Sunday.
Deliveroo insisted that the share price reduction had nothing to do with investor backlash and union action, insisting that it was solely due to market conditions. It has been suggested that four out of six U.S. tech IPOs that were offered for price last week are below the asking price.
“Given the volatile global IPO market conditions, Deliveroo is choosing responsible pricing within the original range and at an entry point that maximizes long-term value for our new institutional and retail investors,” said a Deliveroo spokesman.
They added that Deliveroo had seen strong demand from investors around the world but refused to indicate which ones. “The deal is covered multiple times across the range, led by three highly respected anchor investors,” said the spokesman.