Deliveroo Dampens IPO Expectations as Investors Raise Workers’ Rights Concerns

Deliveroo’s IPO last week was the poster child of a cautionary tale, at least for tech companies looking to access European investment. Not only did it end up pricing at the lowest end of its original target price range, but it fell a further 30% at market debut.

Institutional investors took a stance on both its labour practices and its dual class structure, which in effect provides the founder investors’ capital with neither commensurate voting control, nor a spot at the top of the security waterfall (had it been debt). In other words, it combines the worst aspects of both asset classes.

This may however have the unintended consequence of pushing future European tech listings to US exchanges. Even if Lord Hill’s recommendations are implemented in the UK, such listings could be shunned by investors, rendering the rule changes ineffectual.

Governments Have Identified Commodities Essential to Economic and Military Security

The drill down into supply chains continues, illuminated further the past two weeks by the Ever Given crisis in the Suez Canal. Tensions arising due to geopolitical concerns are highlighting new ESG issues for investors in the already beleaguered mining sector. To achieve a level of independence, and hedge vulnerability to China, western countries might need to mine locally, with the attendant environmental impacts. Is this a trade-off worth the cost? And was it sustainable exporting those impacts to developing economies in the past?

It also highlights a swing away from the past 4-5 decades of free market dynamics to more interventionist states, utilising government agencies to ensure strategic supplies. While Covid established what was supposed to be a temporary state of high intervention, it looks like the freewheeling, globalised era of the recent past is winding down, with technologies (and their supply chains) at the heart of more protectionist government actions.

Tesla Will Accept Bitcoin as Payment, Elon Musk Says

ESG investors must be scratching their collective heads over Elon Musk’s announcement last week. Increasingly, it looks like the low cost of capital afforded to Musk’s enterprises, at least on the institutional side, might be misguided.

This past week has seen his green credentials questioned by the net effect of cryptocurrency mining energy utilisation, layered onto a prior issue with sourcing Cobalt for his batteries from the DRC, potentially using child labour in an arguably corrupt landscape.

In addition, through his Starlink enterprise, he is sending tens of thousands of satellites into orbit, with no known plan for retrieving or recycling them. So are Tesla and/or Starlink bona fide ESG investments?

This matter also highlights the intellectual bubble these founders become increasingly isolated in, instigating what seem like pioneering decisions that don’t appear to take into account real world consequences.

What a Gambling App Knows About You

This analysis highlights three ubiquitous issues across tech firms:

  1. A business model that, when it’s down to a choice of profit versus customer vulnerability, is distinctly at odds with what’s best for customers. So when tech companies say they are ‘customer obsessed,’ that statement may not always have the positive outcomes implied
  2. Regulation, as with all things tech, is lagging in protecting vulnerable populations, which ultimately has a cost to society and its governments
  3. Behavioural profiling is a precarious tool that has to be regulated, to ensure that it is not utilised for short term outcomes that lead to long term consequences. This is not about companies selling or sharing their data (which GDPR covers) but about how they internally use aggregated data to prey on behavioural fallibilities (which all humans possess)

US Threatens Tariffs on UK Exports Over Digital Services Tax

Yet again, tech firms find themselves in the midst of a geopolitical tussle: this time amongst western countries on the tax front. From April last year, the UK government introduced a 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. This is meant to be an interim measure to an OECD-brokered global tax reporting framework for digital platforms. France has also imposed a digital tax.

It seems unlikely that these measures will be reversed, as governments scramble to recoup recent borrowing. In fact, we suspect this is a ‘toe in the water,’ with rates likely to rise as this beds down.