RUTH SUNDERLAND: Why are fund managers singling out Deliveroo while investing in other companies engaging in questionable behaviour?
- How fascinating that some of the UK’s leading investors have succumbed to a fit of pearl-clutching over Deliveroo’s employment practices
- Top fund managers, including Aviva, M&G and Legal & General, are shunning the float
- This sudden concern for workers’ rights on the part of City investors seems surprising
How fascinating that some of the UK’s leading investors have succumbed to a fit of pearl-clutching over Deliveroo’s employment practices. Top fund managers, including Aviva, M&G and Legal & General, are shunning the float.
Ostensibly, they are having the vapours over the treatment of drivers, many of whom make less than the minimum wage because they are classed as self-employed.
This sudden concern for workers’ rights on the part of City investors seems surprising.
Questionable: The sudden concern for workers’ rights on the part of City investors seems surprising
Highly-paid fund managers are not always in the vanguard when it comes to sympathy for the less well-off, or indeed for curbing the excesses of overpaid bosses.
One might ask why they are singling out Deliveroo while investing in other companies engaging in questionable behaviour.
Is running a fleet of self-employed drivers really worse than HSBC’s response to the political situation in Hong Kong? Or more iniquitous than the way mining companies, when not blowing up ancient caves, deal with their employees around the world?
The fate of Deliveroo drivers, however, has given City investors an easy opportunity to do a bit of virtue-signalling, which never goes amiss in this new world of woke.
They have a point. The contrast between a driver’s hourly pittance and founder Will Shu’s stake of around £300million is enough to bring out the socialist in many of us.
My suspicion, though, is that the ethics of the gig economy are a proxy for other, less lofty reasons to steer clear of the float. Fund managers may have qualms on moral grounds that Deliveroo’s business model is exploitative of workers – but they will definitely be aware of the financial risks.
If the firm has to put drivers on the staff, it will be expensive. It has earmarked more than £100million to meet putative costs.
Then there is the reputational aspect. Reports that footballer Marcus Rashford wants talks with bosses do not augur well.
His intervention on inadequate food parcels for pupils brought down a hail of criticism on Chartwells, which provided the meals, and its owner Compass.
Deliveroo is a low-margin business and has never made a profit. It has done well in the pandemic thanks to people ordering takeaway meals at home during lockdown.
One big unknown is whether they will continue to do so once they can eat out again.
Another sticking point for some investors is the dual-share structure, which gives Mr Shu greater control over the firm for three years through enhanced voting rights.
A report by Lord Hill recommending a relaxation of dual-share arrangement rules landed days before the float announcement. Lord Hill’s efforts are aimed at attracting more listings to London. Quantity, however, does not necessarily mean quality.
Deliveroo is the biggest float on the London market since commodities giant Glencore a decade ago.
That business, which also had a powerful controlling figure in the form of Ivan Glasenberg, had it own governance challenges. It enriched senior executives and traders, but its share performance has been a let-down.
The price tag for Deliveroo looks very high. At the top of the range, £8.8billion, its market value would be higher than Sainsbury’s and Morrisons and about the same as Rolls-Royce. For a takeaway platform to be valued on a par with this country’s flagship engineer is a sign of the times.
Of course, if more big-battalion investors back out, it may yet be scaled back.
Mr Shu has tipped a hat to shareholder democracy by offering small investors the chance to buy pre-market shares, unlike many floats where the Sids are shut out.
It’s kind of him, but my feeling is that they would do better to carry on tucking into the takeaways and leave the shares alone.