Deliveroo - IPO25 Mar 2021 21:39
The UK’s largest fund manager has become the latest big investor to say it plans to skip Deliveroo’s initial public offering next week as a backlash gathers pace against its dual-class share structure and its treatment of workers.
Legal and General Investment Management, which oversees £1.3tn in assets, told the Financial Times it was “unlikely to participate” in the IPO, either in its active or passive portfolios.
A number of large institutional investors have voiced concerns around the proposed shareholder structure, which will give Deliveroo’s founder enhanced voting power. Some also see potential regulatory risk as governments around the world take a closer look at the gig economy model, further threatening the food delivery company’s ability to turn a profit.
M&G, Aberdeen Standard Investments and Aviva Investors, which collectively oversee more than £1tn in assets, have told the Financial Times they will shun next week’s listing, which is expected to be the UK’s largest IPO in a decade. Several smaller fund houses that invest heavily in UK stocks are also planning to avoid it.
The UK government hopes that the listing of Deliveroo, which is targeting a market capitalisation of up to £8.8bn, will herald a wave of tech IPOs in the City of London. Rishi Sunak, the UK’s chancellor, endorsed the company’s decision to list in London a day after he recommended a series of changes to the UK’s listing rules that would allow companies with dual-class share structures to obtain premium status, giving them entry to the FTSE 100.
LGIM said it was pushing the UK regulator, the Financial Conduct Authority, to ensure that Deliveroo is not included in premium indices, which would force the asset manager to invest in the company through its passive investment business.
“It is important to protect minority and end-investors against potential poor management behaviour that could lead to value destruction and avoidable investor loss,” LGIM said.
Deliveroo has also faced growing questions about its treatment of the 100,000 couriers who deliver its orders. A study by the Bureau of Investigative Journalism and the Independent Workers’ Union of Great Britain found that, on an hourly basis, many Deliveroo couriers in the UK were paid less than the minimum wage.
If the Deliveroo IPO goes as planned, Will Shu, co-founder and chief executive, will hold a stake worth about £500m and retain 57 per cent of the voting rights. That dual-class control will allow him to veto any attempt to oust him from the board by other investors.
UK Government more interested in IPOs than protecting investors.
Sign In
Follow the stocks
