Concerns over conditions for workers at Amazon-backed Deliveroo are giving institutional investors pause ahead of the food delivery company's initial public offering this year, which is expected to value the company at £8.8 billion ($12 billion).
Two of the U.K.'s largest investors said this week that the working conditions and salaries of Deliveroo riders raised red flags ahead of the company's IPO, which will be the largest listing on the London Stock Exchange in years.
Deliveroo riders "don't necessarily get basic rights for minimum wage, sick leave or holidays," David Cumming, the chief investment officer at Aviva Investments, told the BBC.
"We won't be investing in Deliveroo for a number of reasons but that is one of them."
Cumming's comments were echoed by Andrew Millington, head of U.K. equities at Aberdeen Standard, who called Deliveroo's treatment of workers a "red flag."
"We wouldn't be comfortable that the way in which its workforce is employed is sustainable," Millington said.
Deliveroo told CNBC that riders have the "freedom" to choose where they work and can work with multiple apps at the same time, including rival platforms like Uber Eats. They also stated that there is strong investor interest in the upcoming IPO.
Since Deliveroo riders are technically self-employed, they are not eligible for holidays or sick leave. They also do not have the privilege of the national minimum wage.
While Aviva and Aberdeen Standard are hesitant to invest, several large companies have already purchased Deliveroo shares. Amazon led a $575 million investment round in 2019, and now it holds a 15.8% stake in Deliveroo. Index Ventures, DST Global, and Accel Partners are among the venture capital companies that have invested in the group.
A Deliveroo spokesperson told CNBC that the company is "proud to provide work for 50,000 riders" across the U.K.
Deliveroo announced earlier this month that when the company goes public, it will pay cash incentives to riders based on the number of orders they have delivered.
