Four big UK investment firms say they will not buy Deliveroo shares because of concerns over workers’ rights.
The delivery company hopes to be valued at up to £8.8bn when it lists its shares in April.
But BMO Global, CCLA, Aberdeen Standard and Aviva Investors, which manage £1.5tn combined, said they were put off by the working conditions of its riders.
Deliveroo responded by saying riders had “freedom” to choose their hours.
Deliveroo riders are self-employed, meaning they are not entitled to earn a minimum wage from the company, or holiday and sick pay.
Andrew Millington, head of UK Equities at Aberdeen Standard, told the BBC’s Today programme that the conditions were a “red flag”, adding: “We wouldn’t be comfortable that the way in which its workforce is employed is sustainable.”
He compared Aberdeen Standard’s recent decision to sell off Boohoo shares, following allegations of worker exploitation at suppliers to the online clothing company.
Large institutional investors such as Aberdeen Standard manage money on behalf of organisations, including pension funds. When they invest in a company, they can try to influence the way it is run – such as through relationships with managers and shareholder votes.
But Mr Millington said that sometimes “disinvesting or not investing in the first place is our only option”.
He added that it would be interesting to see whether Deliveroo can attract investors over the longer term “without making progress” on worker rights.
Deliveroo deems its riders to be self-employed, and points out that the High Court has upheld that view. What is more, Deliveroo says its riders value the flexibility that employment status gives them, although it is worth noting that Uber maintained the same thing until it eventually decided its drivers were in fact workers, not self-employed contractors.