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Amazon-backed Deliveroo cuts IPO target range after investor backlash

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LONDON – Food delivery start-up Deliveroo has changed the target value for its initial public offering on the London Stock Exchange, after some some investors expressed concerns over workers’ rights and the company’s share ownership structure.

The Amazon-backed company announced Monday that it will now sell shares for GBP3.90 ($5.40) to GBP4.10 each instead of GBP3.90 to GBP4.60 each. As a result, Deliveroo’s market cap will be between GBP7.6 billion and GBP7.8 billion, instead of between GBP7.6 billion and GBP8.8 billion.

Deliveroo said it’s reacting to market conditions, which have taken a turn for the worse in the last week. Half of the tech IPOs in the U.S., and in Europe, the Middle East, and Africa, priced in the bottom third of their announced ranges last week.

However, the new share price range announcement also comes amid an investor revolt. Several large investors said they plan to shun the Deliveroo IPO on April 7 over workers’ rights and the company’s share ownership structure, which gives CEO Will Shu over 50% of the voting rights.

The U.K.’s largest fund manager, Legal and General Investment Management, which manages over GBP1.3 trillion in assets, said it probably won’t be involved, citing concerns around the gig economy that Deliveroo operates in and the company’s share ownership structure. Aberdeen Standard and Aviva Investors, which manage over GBP800 billion between them, said they’re concerned about Deliveroo workers’ rights, while M&G Investments said it is also planning to skip on the IPO.

It also comes after the Independent Worker’s Union for Great Britain pointed out that some of Deliveroo’s riders can earn less than GBP2 an hour, while Shu was set to net up to GBP530 million in the IPO.

Deliveroo rebuffs accusations it does not treat its riders properly and says that its platform gives them the flexibility to work when they want, as do rivals like Just Eat and UberEats. It says riders earn GBP13 per hour on average during the busiest times.

Deliveroo has offered to pay loyal couriers a bonus of between GBP200 and GBP10,000 in the IPO, with the average payout being GBP440. However, disgruntled riders held a strike in London on Sunday.

Deliveroo insisted that the share price reduction had nothing to do with the investor backlash and the union action, insisting it is purely down to market conditions. It pointed out that four out of six U.S. tech IPOs priced last week are below offer price.

“Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximizes long-term value for our new institutional and retail investors,” a Deliveroo spokesperson said.

They added that Deliveroo has seen strong demand from investors worldwide but declined to specify which ones. “The deal is covered multiple times throughout the range, led by three highly respected anchor investors,” the spokesperson said.

Clarification: The headline and text of this article has been updated to better reflect what Deliveroo has changed with its valuation target.

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