Deliveroo Holdings PLC (LON:ROO) edged higher on Wednesday as retail investors began trading shares in the company, even though many of its delivery riders across the UK were on strike in protest over pay and working practices.
The Independent Workers’ Union of Great Britain (IWGB) said hundreds of its members in London, York, Sheffield, Reading and Wolverhampton are keeping their bikes parked or going on a protest ride to demand fair pay, more safety protections and basic workers’ rights.
When Deliveroo wants to fire a rider and remove their access to the app, the union said “there is no clear appeal process with many requests being completely ignored”.
— alex marshall (@alexjkmarshall) April 7, 2021
Supportive action is expected internationally in Australia, France, Netherlands, Ireland and Spain with local organisations, the union said.
— Kevin Brennan MP (@KevinBrennanMP) April 7, 2021
The initiative is also backed by 71 MPs who last November signed a motion condemning the “opaque and unjust process” of app-based services in the so-called ‘gig economy’.
The MPs noted that couriers are key workers who “are working on the frontline of the covid-19 pandemic and are often putting their own health at risk in the process”, while the company’s practice of dismissal is leaving many of them “on low-incomes facing potential destitution”.
Wednesday was the first day when the 70,000 retail investors who signed up for IPO shares on PrimaryBid were allowed to trade, with the shares having only been changing hands between brokers and institutional investors in the conditional trading period that began last Wednesday.
There were fears that the retail investors who participated in the float would offload their new holdings, but instead the majority seemed to be holding on.
“I’m not sure if this is a vote of confidence or a case of averaging in, but it’s no doubt a big relief to management and the bankers involved that the retail army has not routed at the first sound of gunfire,” said Neil Wilson at Markets.com.
“Given the wipe-out that has already taken place, I think a lot of investors will simply think that it cannot go any lower and it’s worth holding on for a better price. Cutting losers is harder than letting winners run.”
Goldman steps in after messy IPO
It also emerged overnight that Goldman Sachs bought £75mln worth of shares in the company in what might have been an attempt to boost the tanking stock last week, according to a Financial Times report.
Any profits that the giant US investment bank made from buying shares at below the issue price, partly using the ‘overallotment’ reserved for stabilising the IPO, will reportedly be surrendered to Deliveroo as part of a prior agreement.
The share price fell sharply from the IPO issue price amid short-selling by many hedge funds, reports revealed last week.
The tech unicorn’s banks and brokers, including Goldman, JPMorgan, Bank of America, Citigroup, Jefferies and Numis, placed 384mln shares at 390p each, but the stock plunged as low as 271p hours after opening.
There has been bad publicity after a governance scandal prompted big investors to declare publicly they wouldn’t subscribe for any shares, including Aviva, BMO Global, CCLA, Legal & General, Rathbones, Hargreaves Lansdown and Aberdeen Standard.
Aside from ESG concerns, the market is also spooked by the profit outlook, as the firm has remained loss-making despite a boom in takeaways when people were forced to stay home during lockdowns for the past year or so.
Another concern is its dual share structure, since it will enable founder Will Shu to exercise more control over the business while public.
That’s because Deliveroo pays its riders, in a similar way to Uber Eats, which adds more charges on the balance sheet, while Just Eat, instead, operates on a marketplace model where it takes a commission for the order but leaves it to the restaurant to deliver.
It also makes it more difficult to compete outside major centres, where they may be fewer freelance riders available.
Shares were up 2% to 286.39p at lunchtime, a 27% drop compared to the IPO price.