Intense competition, pressure to improve working conditions, reduced prospects post-containment … Despite stunning growth, the model of delivery platforms like Deliveroo faces multiple challenges and has yet to prove its profitability.
The platform will go public on Wednesday in London, a symbol of rapid development, but at the cost of doubts about its economic model and the precariousness of its delivery people. This entry on the market, the most anticipated of the moment in the City, is scheduled for Wednesday for the young British company created in 2013 and known for its application for ordering dishes from restaurants.
The deal will very likely be the largest in London since Swiss mining group Glencore in May 2011. Trading will initially be reserved for professional investors before being open to the general public from April 7.
The precarious working conditions of delivery people denounced
But the well-established mechanics of the IPO, the usual opportunity for a company to present itself in its best light, is disrupted by a wave of social protest, between walkouts of delivery people and concerns from the business world.
Several strikes and rallies, albeit on a limited scale, have taken place in recent days, notably in the United Kingdom, France and Australia. Britain’s self-employed workers union IWGB is planning action on April 7.
Manchester United footballer Marcus Rashford, who has become a spokesperson for the fight against child poverty, even plans to talk to Deliveroo, who supports his association.
All denounce the precarious working conditions of delivery men, recognizable by the imposing turquoise-colored backpacks that they wear when they cycle the streets. These are most often young men, who are self-employed symbols of the “gig economy”, or the economy of odd jobs, on which digital platforms rely to thrive.
However, the tide is starting to turn.and paid leave for its drivers in the UK.
Deliveroo ensures, for its part, that its deliverers seek flexibility and are paid more than 10 pounds an hour on average. A study relayed by the IWGB, however, points to poverty wages sometimes falling to 2 pounds an hour as in the case of a delivery man from the north of England.
The company, which employs 2,000 people, works with 115,000 restaurants in 800 cities around the world and has some 100,000 delivery people. The viability of its economic model now worries even very influential investors of the City.
Several asset management giants like Aberdeen Standard and Aviva Investors, each weighing hundreds of billions of pounds, are unwilling to invest in the company citing the bad example set by its social practices. They consider that Deliveroo could be a bad investment if its reputation were to be damaged, not to mention the cost if it had to reclassify its delivery people.
The ambition to raise 1 billion pounds
In its thick stock market document, the company did not mention the famous ESG criteria (social environment and governance), which have nevertheless become almost essential in the business world. On the other hand, she revealed to have set aside 112 million pounds (131.17 million euros) in 2020 to deal with the consequences of pending litigation. Delivery men are in particular on appeal in the United Kingdom to obtain a collective agreement.
The company is playing big during its IPO which comes at a time when its activity is boosted by the pandemic. It aims Wednesday a valuation of between 7.6 and 7.85 billion pounds, after having had to revise its ambitions downwards due to “difficult” market conditions.
Deliveroo, in which the giant Amazon holds 16% of the capital, will take the opportunity to raise 1 billion pounds (1.17 billion euros) of new money to finance its growth, even if profitability is not yet at Appointment.
The IPO should allow its founder and CEO Will Shu to grow his shares. He has also opted for a system of two types of shares for a period of three years in order to maintain control while disposing of a share of the capital. This operation, described as “fantastic” by the British Minister of Finance Rishi Sunak, finally has symbolic value for the United Kingdom which defends the attractiveness of its financial center, in competition with the rest of Europe with Brexit.