Deliveroo will go public with 130 million reserved to face the rejection of the European justice to its model of 'riders'

The prospectus is the document that every company seeking to go public must present weeks before its debut so that potentially interested investors can know in depth what the company's results are, what weaknesses it may have or what risks are exposed. "Our business model would be adversely affected," says the headline for one of these risks, "if changes in the law force us to reclassify our riders as employees." This has already happened in Spain, as well as in other countries such as France, Italy, Belgium or Australia, where Deliveroo's relationship model with delivery drivers has been questioned by both the authorities and the courts.

Despite this situation that Deliveroo, Glovo and other companies in the sector are experiencing, the British platform maintains in the aforementioned document a defense of its business model based on the fact that the riders are self-employed. "For riders, our platform enables a market that creates flexible work, with attractive rewards and the opportunity to work when, where and how riders want," the company notes in the brochure. "Working with Deliveroo means that riders access the additional security of free accident and injury insurance from the first order, free access to a safety kit, safety orientation and skills development opportunities," claims the British group.

The document contains an extensive plea in favor of Deliveroo's business model, presenting itself as a platform that connects consumers, restaurants and delivery people. The latter, therefore, are not part of the company's workforce, which, as reported in the brochure, at the end of 2020 consisted of 2,060 employees. They are almost 700 employees less than a year before.

However, despite his defense, the company assumes that justice and the new regulations are not giving him the reason. "We believe and continue to affirm that couriers are self-employed and we have defended our model successfully in the UK. However, we have not been successful in defending our position in all cases," he explains. The company points to cases such as that of Spain and other countries such as those markets where its defense of the model of linkage with the distributors has not been "successful".

Advancing the impact that this reality can have on your business, Deliveroo reports that it has provisions in its accounts to face the implications that justice has not endorsing that the delivery drivers are autonomous. According to the accounts, there are 112 million pounds of provisions, about 130 million euros. It represents a significant increase compared to a year earlier, when the level was four times lower. The bulk of these provisions is due to the causes that the company has open due to the situation of its distributors. Deliveroo says this amount is its "best estimate" of the impact of open processes, based on claims from regulators.

This is an important figure but one that the company opens the door to expand. In the first place, because some of these investigations, which he says are ongoing, can take up to "several years" so that the total cost "may be higher than what is currently provisioned." Secondly, because the platform expects that this type of process, "like other companies in this industry", can be transferred to other subsidiaries of the group that may be the subject of "new investigations and litigation." "We continue to defend ourselves robustly against challenges of this nature, but we recognize that there are jurisdictions that may seek regulation of the economy on demand and as a result the risk may be heightened," Deliveroo emphasizes.

Spain is one of the countries that Deliveroo cites where judicial and government authorities have not validated its work model. Last September, the Supreme Court took a position for the first time, recognizing the employment relationship that exists between the distributors and the platforms. Although in that case the sentence referred to Glovo, for the first time it focused on the situation of false self-employed that the riders had on the part of the high court. Deliveroo has multiple judgments against him at lower levels of the courts. In January 2020, a judgment of the Superior Court of Justice of Madrid required to recognize 532 delivery men as employees and, just one year later, in the first month of 2021, the Barcelona social court forced to do the same with other 748. Unlike in the case of Glovo, so far no ruling favorable to Deliveroo has transpired.

To this is added the recent agreement for the so-called 'Law Rider'. The Ministry of Labor, directed by Yolanda Díaz; The unions and the employers reached an agreement after several weeks of negotiation to recognize the distributors as employees of the platforms, with the recognition of rights that this entails. The rule has not yet been brought to the Council of Ministers and, after its entry into force, it will give the company three months to start up. Despite this, Díaz claimed that in practice the delivery men are already employees.

Therefore, despite the fact that the company continues to be a faithful defender of its model, reality has led it to reserve an important section of the risks that potential shareholders expose to their future employment. Thus, it warns that the situation in Spain, Italy, France or Belgium, some of its main markets outside the United Kingdom, may have a significant impact on its results. "We may not be successful in our requests and advice to change legislation or practice, which may adversely affect our business," acknowledges the company in its document to go public.

10 billion valuation without profit

"Legislation or court decisions of this type may require us to change the fundamentals of our business model in relevant jurisdictions," Deliveroo notes in the brochure. "This can cause us to incur significant additional expenses to pay the distributors, even in markets that we have left," the company emphasizes, recognizing that of all these open processes, "retroactivity" can be important. The British group concludes this section with a warning: "If we are required to make changes regarding the relationship with the distributors, this could affect our ability to continue operating in those markets."

The document was registered by Deliveroo before the British stock market authorities on March 8, but it has been expanded on Monday to give figures for the amount of the operation, still undated. Specifically, Deliveroo intends to list 384.6 million shares at a price between 3.90 and 4.60 pounds per share. With this, the British group could attract some 1,796 million pounds (just over 2,000 million euros) and reach a valuation of more than 8,800 million pounds, equivalent to about 10,250 million euros, according to current exchange rates .

Deliveroo wants to achieve this assessment despite the fact that the company does not make a profit from its activity. The group closed last year with losses of 226.4 million pounds (263 million euros). Not even having signed its best year due to the boost that the coronavirus crisis gave its business due to the increase in home orders led the company to leave the red numbers behind. Last year it had a turnover of 1,381 million euros, according to the accounts, which represented an increase of 54% compared to the records of a year earlier. "The growth we have obtained in revenue in 2020 is due in part to the confinement restrictions by COVD-19 and may not be representative of our behavior in the future," warns the company itself. The company will go public, therefore, without a shareholder dividend policy because "we continue to focus on investing to create growth."