Last week, I told you about the rumors swirling around the food-delivery company DoorDash preparing its IPO paperwork for a December market debut.
Well, the rumors became reality on Friday, November 13 when it was announced that the company had filed its S-1 with the SEC.
DoorDash is one of the largest food delivery startups in the U.S. Founded in 2013 by Tony Xu, Andy Fang, Evan Moore, and Stanley Tang, the company is based in San Francisco, California. It filed for its IPO earlier this year in February, but before the company could go full force with its IPO roadshow, the world began coronavirus shutdowns. It wasn’t until summertime that the IPO market started to pick back up, though market volatility lingered.
DoorDash most likely waited until after Election Day to file its S-1 for a few reasons. One of those reasons is something I mentioned last week: The company most likely wanted to get some clarity on Proposition 22 in California and how it was going to navigate that decision. With its passage, DoorDash no longer has to worry about having to provide its delivery workers with employee benefits. It can continue to classify its “dashers” as contractors. Not having to pay for benefits will save DoorDash a lot of money, which was good news for the company as it’s been losing money since it’s founding. Having to provide benefits would make it extremely difficult for a company like DoorDash to thrive or even continue to exist.
It’s true the pandemic lockdown was more of a blessing than a curse on food delivery companies like DoorDash, which experienced a major increase in its revenue because its platform connected people who were stuck at home to their favorite restaurants and other necessities. DoorDash was able to maintain its business and reported revenue of $1.92 billion in the first nine months of the year — more than a 200% increase from the same period last year when it reported earning $587 million.
DoorDash had 543 million orders through September compared to 181 million orders in the same period just a year ago. DoorDash generates revenue from the fees paid by customers and from the commission that’s charged to merchants for orders that have been completed through DoorDash’s marketplace.
Even with the surge in its revenue, the company continues to lose money. Its net loss in the first nine months of 2020 was $149 million compared to its net loss of $533 million in 2019. DoorDash was able to earn a $23 million profit in the second quarter of this year, but that shortly dwindled, and it experienced a loss in the third quarter. To me, if a company is still experiencing a loss even with a massive increase in orders, that could be a red flag. It may not seem like it now, but this pandemic will come to an end, and there’s a chance that orders could slow down for DoorDash. However, there is also the possibility that the pandemic actually shifted our norms. Maybe now that we’ve been living in this “alternate reality” for the past eight months, people are now used to ordering food and their groceries from delivery apps. Perhaps they are now more comfortable with it and even prefer that option. Obviously, it’s hard to predict the future. I’m sure none of us imagined this would be what our lives looked like a year ago.
According to Pitchbook, a source that tracks startup funding, DoorDash raised about $3 billion in total capital. In June, it was valued at $16 billion after a recent private funding round that earned about $400 million. DoorDash plans to list on the NYSE under the ticker symbol “DASH.” It will offer three classes of stock with different voting shares. As of right now, there is no expected IPO date and no indications of the IPO price range. Those details don’t usually get sorted out until a few days or even the night before a company goes public.
Research from Edison Trends shows that DoorDash currently has the greatest market share in the food delivery market, making up about 48% of it. That’s almost half the entire market, which should put the company in a unique position for future growth. It’ll have to fight to stay locked in that position by continuing to innovate and logically expanding its businesses. However, there’s no certainty that food-delivery platforms like DoorDash, Uber (NYSE: UBER), Postmates, and Grubhub (NYSE: GRUB) will be useful in the future or if these companies will even be around in the next decade. They are very niche, and trying to appeal to investors can be difficult — especially since it’s a fairly new industry.
I still think a December IPO for DoorDash might be a little soon. An IPO in early 2021 would be more beneficial, but I’m not sure that the company feels the same way. On the surface, an end-of-the-year IPO could seem more appealing since the company can shift its focus to its increasing revenue, its brief period of profitability, and its ability to shrink its net losses from the previous year’s financials. Whenever the company decides to go public, investors will be excited to be a part of it. It’s a well-known company in a fairly new and exciting industry, with a few more marketable qualities right now because of its huge revenue increase from the previous year.
If you’re interested in DoorDash’s upcoming IPO and news and research on other IPOs, then click here.