Deliveroo has slashed its target valuation by almost £1bn after major City investors shunned the takeaway firm’s bid to go public.
The Amazon-backed food delivery app has cut its float offer price to between £3.90 and £4.10 per share, blaming volatile market conditions.
This values the company at up to £7.85bn – which is £950m less than when shares were initially marketed for between £3.90 and £4.60 each.
It comes after a string of major British asset managers said they would not invest in the company amid concerns about its treatment of drivers and the control being retained by founder Will Shu, an American former investment banker.
Food services analyst Peter Blackman said: “It looks like the amount of interest is not what they hoped for. “There are the potential legal issues about whether the employment status [of couriers] will need to be changed, and therefore add to costs and increase losses.”
Deliveroo has always claimed that its so-called gig economy model gives riders the flexibility to work when they like, adding this has already been tested and upheld by UK courts. However, couriers have no holiday pay or workplace pension and are not guaranteed a minimum wage.
A string of major investment firms have passed over the opportunity to invest in the company, including M&G, Aviva Investors, Aberdeen Standard and Legal and General. The refuseniks were joined on Sunday by Scottish Mortgage Trust, one of Britain’s most successful tech investors.
Some firms such BMO Global Asset Management have also shunned the company amid concerns over its business model. Others have expressed concern that the Delviroo’s dual-class voting structure is counter to good corporate governance.
The company is giving Mr Shu voting control for three years to prevent him from being ousted and let him block takeovers, even though he will own a minority stake. Deliveroo said it has received “very significant demand” from institutions across the globe.
Final pricing will be set on Wednesday, before Deliveroo shares begin trading on the London Stock Exchange in what is expected to be a major test for the UK’s ability to attract tech start-ups.
A spokesman said: “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.”