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Deliveroo Shoots for £5 Billion Valuation as Workers Take Gig Economy Juggernauts to Court

Deliveroo announced plans to go public on the London Stock Exchange a week after a Supreme Court ruling that could irreversibly change its business model

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Deliveroo’s new restaurant delivery service fee could bank the London company £11 million a year Ben McMahon/Eater London

Deliveroo’s restaurant delivery juggernaut is in line for a £5 billion initial public offering (IPO), whose float date is expected to be early April 2021. Founder Will Shu announced this week that it will float on the London Stock Exchange, with the company revealing that while its transactions rose 64 percent in 2020 to £4.1 billion, its losses dropped only 29 percent, from £317 million to £223 million. It’s floated the idea of a float since 2017.

In the U.K., Deliveroo claimed that the early days of the coronavirus pandemic were a mortal threat to its survival — and that only a £442 million cash injection from the shiny head of Jeff Bezos’ Amazon. The Competition and Markets Authority (CMA) decision to provisionally approve the funding from April 2020 — less than one year ago — stated that Deliveroo “recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.” Amazon’s funding was approved in summer 2020 — by which time restaurants were in the midst of a reopening frenzy and delivery was firmly on the up.

The initial approval was predicated on the fact that its collapse would shrink the food delivery market, worth £8.5 billion in 2019, and thus make it less competitive. While revenues did drop from the initial shock of national lockdown in March 2020, going from on the verge of “exiting the market” to a £5 billion float in twelve months is a prodigious reversal of fortune that casts the continuation of a global pandemic as the cerulean kangaroo’s deus ex machina.

It has also spent time positioning itself as a friend to restaurants throughout the last twelve months. Shu opined that “restaurants are hurting” in summer 2020 while noting that COVID-19 had accelerated the customer behaviour his business relies on by “one to three years.” Deliveroo even pressured chancellor Rishi Sunak to reprise Eat Out to Help Out, which applied only to dine-in service — a restaurant that closes permanently is not a restaurant in need of a delivery app.

With the float comes further sweeteners: a fund of up to £10,000 bonuses per rider, which the Independent Workers’ Union of Great Britain (IWGB) has labelled an “apology fund” for workers who aren’t guaranteed a minimum wage or holiday. Existing customers can buy up to £1,000 of shares each, but the structure of the deal — known as “dual class” — means that chief executive Will Shu’s shares are worth twenty votes each to joe public’s one. Focussing on the company’s British roots has earned plaudits from the chancellor, whose commentary might lead to questions on just how close Deliveroo is to Westminster, and to a government which employed the delivery company’s former head of communications as press secretary to the prime minister until the start of the pandemic, and whose regulation policies will shape its future.

The coronavirus pandemic has by and large stalled, stifled, and closed restaurants where it has accelerated and emboldened the delivery companies that rely first on their existence and second on stealing their direct customers. In the roiling U.S. delivery wars between Seamless, Doordash, and Grubhub, growth came hand-in-hand with necessary scrutiny. As Grubhub signed up more and more restaurants, it faced more and more lawsuits for spurious fees and parasitically listing restaurants without their permission. As more and more people ordered delivery, more and more state legislatures capped commission fees to protect restaurants.

Deliveroo is announcing the float, which values a loss-making company in the billions, a week after the Supreme Court upheld a ruling that forces Uber to classify its drivers as workers, not self-employed contractors. Deliveroo workers that ferry the food that has taken it to this float — alongside its technology — currently have no such rights. The gig economy cuts two ways.