Delivery Hero Shares Drop

Delivery Hero's (ETR:DHER) shares dropped over 11% after announcing it would employ delivery riders in Spain.

This decision comes in response to legal and regulatory pressures under Spain's "Rider Law," which seeks to reclassify gig workers as employees instead of independent contractors.

The move specifically pertains to Glovo, Delivery Hero’s Spanish subsidiary, aimed at addressing ongoing disputes and fines related to worker classification.

Analysts from Jefferies suggest that this transition to an employed rider model is a strategic effort to reduce the risks of escalating fines and improve negotiations with Spanish regulators.

Delivery Hero has previously faced fines for alleged misclassification of riders, with potential liabilities ranging from €440-770 million, as mentioned in the company's FY24 reports.

Although the company contends that these fines lack a legal basis, complying with the Rider Law may foster dialogue with the Spanish government, potentially leading to a negotiated settlement.

The financial consequences of this decision are significant, with Jefferies projecting a negative impact of about €100 million on Glovo Spain's Adjusted EBITDA in FY25.

Nevertheless, analysts remain optimistic about the company achieving positive EBITDA in Spain by that year.

On a broader scale, Delivery Hero expects incremental gains in its European operations, projecting EBITDA of €68 million and €149 million for FY25 and FY26, respectively.

This situation highlights the financial and operational challenges of gig economy regulations and the uncertainties surrounding labor laws in Europe. The Rider Law is central to European policy discussions, and Glovo's strategy may shape future labor frameworks, promoting a balance among companies, workers, and regulators.