Workers' rights worry

L&G and M&G join boycott of Deliveroo IPO


Concerns have been raised over the gig economy

Legal & General Investment Management and M&G have added their names to the list of institutional investors who will not be supporting Deliveroo’s £8.8 billion stock market flotation.

They join Aberdeen Standard Investments and Aviva Investors who last week said they would boycott the issue over concerns at the company’s treatment of workers.

L&G manages £1.3 trillion of pension and investment funds while M&G has £367 billion under management.

Other major funds including BMO Global and CCLA also went public with their views on the pay and conditions of workers in the gig economy.

BMO said Deliveroo’s employment practices were a “ticking bomb” which made the company “uninvestable”.

Rupert Krefting, head of corporate finance & stewardship at M&G, said: “We do not intend to participate in the Deliveroo IPO.

“Whilst we acknowledge the disruptive impact that Deliveroo has had on the food services market, we still see risks to the sustainability of its business model for long term investors.

“This is largely driven by the company’s reliance on gig-economy workers in the UK as informal employment contracts potentially fall short in offering the value, job security and benefits of full employment.

“Uber is a very topical example of greater legal rights being enforced by the Supreme Court to riders previously categorised as self-employed.

“Key competitor, Just Eat, already offers full employment contracts to its UK-based riders.

“Deliveroo’s narrow profit margins could be at risk if it is required to change its rider benefits to catch up with peers, in an industry that is already facing severe competitive pressure between the large tech platforms.”

L&G Investment Management said it was “unlikely” to invest because it was concerned about Deliveroo’s dual share class structure, which gives more power over the company to founder Will Shu than to other shareholders.

It did not condemn the company’s approach on workers’ right, but it did say that “2021 has certainly brought a step change in focus on industry regulation as we see increasing signs of countries and governments reviewing the gig economy status.”

It added that it takes it role “as a responsible steward of our clients capital very seriously and engage with a number of companies in this sector on ESG concerns, like the rights of employees and proposed share class structures.”

James Bevan, chief investment officer of CCLA, a £10bn manager of money mainly for charities and church organisations, said there were many issues preventing it from investing in Deliveroo’s IPO, including concerns over its labour practices.

Fidelity and T Rowe Price have already backed Deliveroo ahead of the company’s debut on the stock, which is due on 31 March.

A key issue for some investors is whether Deliveroo should make its riders employees rather than self-employed.

Deliveroo claims its riders are not employees because they can work for other firms and are free to turn down orders.

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A spokesperson for the company said: “This proud British business looks forward to listing on the London Stock Exchange.

“Deliveroo has received very significant demand from institutions across the globe. The roadshow began on Monday and the deal was covered by demand across the full price range by the end of the first morning.

“Demand has continued to build since then, including via our community offer, and we look forward to welcoming new shareholders next week alongside our currently highly respected existing investors.”

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