Deliveroo is set to price its imminent float at the bottom of the range due to investor concerns over the pay and working conditions of its riders.

The takeaway delivery app is set to price its shares between 390p and 410p when it starts trading tomorrow, valuing the group at between £7.6bn and £7.86bn. 

That could be around £1bn down on the initial valuation Deliveroo sought when it announced its intention to float last week. 

The decision from Deliveroo comes after institutional investors such as Aviva, Legal & General, Aberdeen Standard and M&G all said they would not take part. 

Some investors in the City are reportedly concerned by the voting power of founder Will Shu, whose so-called Class B shares will carry 20 times the voting value of other shares.

Others have raised concerns about the business’ more than 100,000 riders, who Deliveroo treat as independent contractors rather than full-time employees. 

EdenTree Sustainable and Responsible UK Equity fund manager Ketan Patel told The Times: “The Deliveroo business model is best characterised as a race to the bottom with employees in the main treated as disposable assets, which is the very antithesis of a sustainable business model.”

A Deliveroo spokeswoman said the company had received “very significant demand from institutions across the globe”, and that the book was “covered multiple times throughout the range, led by three highly respected anchor investors”.

She added: “Given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”

Founder Shu, a former Wall Street analyst who founded the business with friend Greg Orlowski in 2013, has also previously defended the way Deliveroo employs drivers, saying many prefer the freedom and flexibility afforded them by their contractor status. 

The loss-making group’s float is being run by Goldman Sachs and JP Morgan, with Merrill Lynch, Jefferies and Numis acting as joint bookrunners.

UK customers of the delivery app can apply for a £50m pot of shares worth up to a maximum of £1,000 per person.

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