Delivery giant DoorDash plans IPO
Delivery giant DoorDash Inc. plans to sell its inventory to the public, capitalizing on the growing trend by consumers to embrace app-based deliveries as much of the world is staying at home during the pandemic.
The San Francisco-based company filed papers signaling its intention to make an initial public offering on Friday.
Technology has changed consumer behavior and sparked a wave of demands for convenience, the company said in its prospectus. “Recent events have further accelerated these trends, advancing the future of e-commerce for businesses large and small.”
Its revenues reflect the explosion in demand for delivery.
But DoorDash has lost money every year since its founding, and the company has warned potential investors that the losses may continue as the company anticipates increased spending. It posted a net loss of $ 667 million in 2019 and $ 149 million in the first nine months of 2020. The company made a profit of $ 23 million in the second quarter of this year, but followed with a loss of $ 43 million in the third quarter.
DoorDash said it plans to devote substantial resources to the development of its platform, including “expanding our platform offerings, developing or acquiring new platform features and services, expanding into new markets and geographies and increasing our sales and marketing efforts. “
DoorDash, which was founded in 2013 in Palo Alto, California, has over 18 million customers and 1 million dashers who deliver food to the United States, Canada and Australia. It has more than 390,000 traders in its network.
The announcement came a week after delivery companies won a major victory in California, where voters passed Proposition 22, which allows app-based delivery companies to treat drivers like contractors rather than like employees. Before that passed, they faced a future where they would have to treat drivers like employees with access to expensive benefits like overtime and sick days. Transport and delivery companies have won an exception, and instead will offer limited benefits such as health care subsidies to drivers who time 25 hours per week.
It is clear that DoorDash waited to start the IPO process until after the vote on California Proposition 22, Wedbush analyst Daniel Ives said.
It would have been an uphill battle if Prop 22 hadn’t been adopted in California, Ives said. “It puts a dark cloud in the rearview mirror and really opens the tap to investor appetites.”
DoorDash claims to have captured 50% of the food delivery market in the United States, followed by Uber Eats, Grubhub and Postmates. But the food delivery market is “fragmented and extremely competitive,” and its competitors have made strategic acquisitions or deals to work together, the company warned. In addition, some of our competitors have recently acquired kitchens to enable them to produce and deliver food directly to consumers, the company said.
With the novel coronavirus outbreak in most of the United States and other parts of the world, Ives sees even more growth for DoorDash and its major competitors next year. It is possible that DoorDash will start making money in 2021, he said.
The gold mine of growth is this COVID pandemic, Ives said. You’ve seen growth rates two or three times the best-case scenario, given that it’s the main artery for consumers not just in the United States, but around the world, to get their food. “
DoorDash will experience continued growth over the next 12 to 18 months, as the United States and other markets are likely to see some form of pandemic lockdown return as the virus worsens, he said.
No industry has benefited more than the delivery of food, he said. In a horrible environment, one positive aspect has been, from an economic standpoint, it has been a huge positive for those workers, drivers and restaurants who could use companies like DoorDash in this environment.
DoorDash has yet to reveal how many shares it will sell or how much money it hopes to generate from the offering.
Co-founder and CEO Tony Xu said that as a child, after his family immigrated to the United States from China, he helped his mother, who had been a doctor in China, wash dishes at a Chinese restaurant for that she was serving food. DoorDash exists today to empower those who, like my mom, came here with a dream to be successful on their own, he said.
