UK and EU funds avoid Deliveroo
British and European investors have overwhelmingly avoided Deliveroo, with data showing that only four of the continent’s 18,000 mutual funds have invested in the food delivery company since its disastrous IPO in March.
Deliveroo’s IPO has been called the worst in London’s history after its stock price fell 26% on the day it opened. Two months later, its shares are still trading more than a third below their 390p quote price, closing Friday at 251p.
Investors spoke out ahead of the IPO, saying they would avoid the company over concerns about its dual-class stock listing, governance and labor standards.
According to Morningstar data, the only UK-domiciled fund to report investing in Deliveroo is managed by River and Mercantile for wealth manager AFH Group. The other three funds to hold the stock are the Enginyers Accions Europa fund, based in Spain, and two European domiciled funds of 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.
Almost all of the mutual funds that have backed Deliveroo are domiciled in North America, including funds from Fidelity, T Rowe Price and Federated Hermes, according to Morningstar.
Tom Powdrill, head of stewardship at Pirc, the UK proxy advisor, said it was “striking that those who are closer to the stock – both in terms of listing and where Deliveroo does a large part of its business – are much less likely to invest ‘in the London-based company.
“If I were an American investor, I think the lack of domestic support for the action would be something to watch out for,” he added.
He said this was potentially motivated by the growing interest of European investors in environmental, social and governance issues.
Colin Baines, head of investment engagement at the Friends Provident Foundation, said the coronavirus pandemic had brought social issues such as working conditions to the fore. “Having Deliveroo in wallets is a sure-fire way to signal clients that they may not be integrating social issues. [into investment decisions] so good.”
Deliveroo said more than a third of its stake came from UK-based investors, including the UK arms of international asset managers. Morningstar data covers 40,000 open-end funds worldwide, including 18,000 domiciled in the UK and Europe.
Shares of other online food delivery companies, from Ocado to Just Eat Takeaway, have also underperformed in recent weeks, with investors fearing the industry is now losing that customers are allowed to return to restaurants.
But according to a recent report from Takealytics, a research team that tracks food applications, the delivery “appears to have held up well,” in part thanks to promotional activity.
Large institutional investors had also expressed concerns about Deliveroo’s two-class structure, which gives Deliveroo co-founder Will Shu increased voting power. This share structure excludes it from the London premium listing, leaving some investors unable to purchase the share.
“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 business as he sees fit for years, ”said Andrew Millington, head of UK equities at Aberdeen Standard Investments, ahead of the IPO.
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