DoorDash shares jump 86% in Calif. firm’s IPO
Food delivery company raises $3.4 billion amid pandemic
DoorDash shares soared in its initial public offering Wednesday, capping a year of explosive growth for the food delivery company.
What’s not yet clear is whether DoorDash can keep the momentum going even if delivery demand eases in a post-pandemic world.
The San Francisco-based company raised $3.4 billion in the offering. Shares jumped 85.8% to close at $189.51 after DoorDash priced them at $102 each late Tuesday. The closing price valued the company, which is trading under the symbol DASH, at around $72 billion.
DoorDash was born in 2013, when CEO Tony Xu and some classmates at Stanford University set up a website and posted local menus. After a few hours, they got their first order: pad thai with prawns and a side of spring rolls.
Customers have placed more than 900 million orders since then. DoorDash now offers delivery from 390,000 merchants in the U.S., Canada and Australia. Powering that service are 1 million delivery drivers, who are independent and not considered DoorDash employees.
DoorDash was growing before the pandemic thanks to customers’ growing preference for dining at home. Between 2018 and 2019, its revenue more than tripled to $885 million.
But lockdown orders and the closure of indoor dining have made DoorDash indispensable for many restaurants and diners this year. DoorDash reported revenue of $1.9 billion in the first nine months of 2020 alone.
However, DoorDash has lost money in every year since its founding, citing the cost of developing its platform and expanding into new markets.
DoorDash had a net loss of $667 million in 2019 and lost $149 million in the first nine months of 2020. The company did turn a profit of $23 million in the second quarter this year, but followed with a $43 million loss in the third quarter.
In a government filing, DoorDash said it expects to continue to spend heavily as it tries to expand internationally and add non-food businesses to its platform. DoorDash is also candid about the impact of the coronavirus, saying it expects its growth rate to slow in the coming quarters as the pandemic ends.
Before the pandemic, 63% of U.S. restaurant traffic was picking up food to eat elsewhere. In the second and third quarters of this year, that had jumped to 90%, and it may stay elevated even when the pandemic ends, according to Hudson Riehle, a senior vice president with the National Restaurant Assocation.
DoorDash controls 50% of the U.S. food delivery market. Its chief rival, Uber Eats, controls 26%, while GrubHub holds 16%. That’s a change from 2018, when GrubHub was the market leader with 39% share and DoorDash held 17%.
DoorDash pulled ahead by concentrating on suburbs and smaller cities, said Mark Shmulik, an analyst with Bernstein. Skeptics thought the economics of food delivery would fall apart in less dense areas, because there was lower demand. But suburban families put in larger orders and drivers encountered more predictable traffic and parking, Shmulik said.