British and European investors have overwhelmingly shunned Deliveroo, with data showing that only four of the continent’s 18,000 mutual funds have invested in the food delivery business since its disastrous March IPO.
Deliveroo’s initial public offering was called the worst in London history after its stock price fell 26 percent on its opening day. Two months later, the shares are still trading at more than a third below their quotation price of 390p, closing at 251p on Friday.
Investors spoke out prior to the IPO and said they would avoid the company due to concerns about the stock listing, governance and labor standards of two classes.
According to Morningstar data, the only UK-based fund to disclose investing in Deliveroo is managed by River and Mercantile for asset manager AFH Group. The other three funds holding the shares are the Spain-based Enginyers Accions Europe fund and two Europe-based funds from Morgan Stanley and Franklin Templeton.
Morgan Stanley, Franklin Templeton, AFH Group, and River and Mercantile declined to comment. Caixa d’Enginyers did not respond to a request for comment.
According to Morningstar, nearly all of the mutual funds that Deliveroo backed are based in North America, including funds from Fidelity, T Rowe Price and Federated Hermes.
Tom Powdrill, chief stewardship at Pirc, the UK proxy advisor, said it was “ striking that those closer to the action – both in terms of listing and where Deliveroo does much of its business – are far less likely to invest. in the Company based in London.
“If I were a US investor, I think the lack of domestic support for the stock is something to keep an eye on,” he added.
He said this may have been driven by the growing interest of European investors in environmental, social and governance issues.
Colin Baines, investment engagement manager at Friends Provident Foundation, said the coronavirus pandemic has raised social issues such as working conditions. “Having Deliveroo in wallets is a safe way to show customers that they may not be integrating social issues [into investment decisions] very well.”
Deliveroo said more than a third of its equity stake comes from investors in the UK, including the UK arm of international asset managers. Morningstar data covers 40,000 open-ended funds worldwide, including 18,000 in the UK and Europe.
Shares in other online delivery companies, from Ocado to Just Eat Takeaway, have also underperformed in recent weeks as investors feared the industry would lose as diners are allowed to return to restaurants.
But according to a recent report from Takealytics, a research group that tracks food apps, delivery appears to have “held up well,” thanks in part to promotional activities.
Major institutional investors had also raised concerns about Deliveroo’s dual-class structure, which gives Deliveroo’s co-founder Will Shu more voting rights. This stock structure precludes it from the premium London listing, which prevents some investors from buying the stock.
‘We wouldn’t have the power to do anything [because of the rights the chief executive will hold for three years]. The CEO could run the company however he wants for years to come, ”said Andrew Millington, head of UK equity at Aberdeen Standard Investments, prior to the IPO.
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