Deliveroo Shares The Dough: Long-standing couriers to receive bonuses alongside IPO launch
March 26, 2021
3 min read
What's going on here?
When Deliveroo lists on the London Stock Exchange (LSE), it has stated that its busiest couriers will each receive bonuses of up to £10,000 from a dedicated £16m fund.
What does this mean?
Deliveroo, a well-known food delivery company, is planning to launch an IPO (Initial Public Offering) worth an estimated £5bn (for a full explanation on IPOs, check out our video here). While Deliveroo confirmed the shares from this IPO will be listed on the London Stock Exchange, it also announced that couriers from across all its 12 markets who have worked for at least one year will be paid bonuses of either £200, £500, £1,000 or £10,000 depending on the number of orders each courier has delivered.
In addition to these bonuses, Deliveroo customers will benefit through the chance to purchase up to £1000 each from a pool of shares worth £50m. Again, Deliveroo are rewarding loyalty because if demand for these customer shares is too high, more established customers will be prioritised to ensure “a mixture of new and existing customers benefit”. Founder and Chief Exec Will Shu explained this was to ensure “as many customers as possible [have] the chance to become shareholders” on the rationale that “far too often normal people are locked out of initial public offerings and the only participants are the institutional investors.”
What's the big picture effect?
The decision to split the rewards of the IPO with Deliveroo’s couriers and customers is a telling point. These bonuses are far more than a clever PR stunt to promote the IPO. In what is effectively “buying” the loyalty of couriers and customers at a cost of £16m and £50m respectively, Deliveroo is trying to build a brand that demonstrates it cares about its people; a shrewd strategy at a time when gig economy firms are facing increased scrutiny.
The interest in the finances behind Deliveroo’s IPO is even greater given that it is yet to turn a profit. In fact, pre-tax losses actually grew from £243.3m to £317.7m in 2019! But more importantly, sales rose 62% to £771.7m during the same period. Furthermore, the stay-at-home restrictions prompted by the COVID-19 pandemic have sparked a surge in demand for home deliveries. Speculators believe continued lockdowns have conditioned a permanent shift in consumer behaviour towards having takeaways more frequently. This suggests that even as restrictions on the hospitality sector ease, delivery firms will have a very promising future, more so for Deliveroo now it is going public.
The announcement of Deliveroo’s IPO in London is particularly welcome news for the City following the January headline that Amsterdam has now overtaken London as Europe’s top trading hub (see our story on that here). Nonetheless, a recent government-commissioned review of the UK’s listing rules made recommendations as to how London could become a more attractive market for companies to float and regain this title. Most significantly, the review recommended allowing two different classes of shares with differential voting rights, which is the very dual-class share structure that Deliveroo intends to use in its listing!
With continued home deliveries from Deliveroo on the horizon, it will be interesting to see whether the review’s recommendations will deliver finance back to its home in the City. News of Deliveroo’s IPO resembles some truth in that belief for UK businesses, however hopeful. Maybe the future will see others follow in prioritising the loyalty of its workforce and customers as Deliveroo are doing here.
Report written by Seb Stacey
Share this now!
Check out our recent reports!