By Micah Maidenberg
DoorDash Inc. delivered for investors, surging 86% in its
stock-market debut on Wednesday.
The seven-year-old company ended its first trading day valued at
about $71.8 billion, based on a fully diluted share count and
higher than many of the restaurant companies that depend on its
couriers.
DoorDash's shares opened Wednesday afternoon at $182 each on the
New York Stock Exchange, 78% above its higher-than-expected initial
public offering price.
The stock ended trading at $189.51, giving it a market value
that surpasses the combined worth of Chipotle Mexican Grill Inc.,
Domino's Pizza Inc. and Dunkin' Brands Group Inc.
The San Francisco-based company has never turned an annual
profit, but a surge in demand during the Covid-19 pandemic has
helped to transform it.
Revenue and orders at DoorDash more than tripled this summer and
fall, compared with the year before, as consumers tired of prepping
food at home and ordered more meals for delivery. A push into the
suburbs also has helped DoorDash become the market leader in U.S.
food delivery.
Founded in 2013 by Tony Xu, who emigrated from China with his
parents when he was 5 years old, DoorDash now must defend its
nearly 50% U.S. market share in the competitive food-delivery
industry and stoke further growth to satisfy heightened shareholder
expectations.
The company believes the ease by which diners can get food
delivered won't be a fad, but demand could slow as vaccines for the
coronavirus are distributed and patrons return to restaurant dining
rooms they have been avoiding.
"Once people get used to a habit, they tend to stick with it. We
saw this with e-commerce, we saw this with booking travel over the
internet, " Mr. Xu, a 36-year-old who earned an M.B.A. from the
Stanford Graduate School of Business, said in an interview.
DoorDash has trained its efforts on suburban areas, allowing the
company to benefit in part because families there tend to place
larger orders.
The company controlled almost half of the U.S. food-delivery
market as of mid-October, up from one-third the year earlier,
giving it a lead over Uber Technologies Inc.'s Eats service,
Grubhub Inc. and other rivals.
The company will be the only public stand-alone U.S.
food-delivery company after Grubhub agreed to be acquired in
June.
Uber Technologies recently bought rival Postmates Inc. for $2.65
billion, in a move aimed at helping it in delivery.
DoorDash has focused on boosting the number of restaurants from
which consumers can choose on its app and expanded into grocery
deliveries during the pandemic.
Mr. Xu said deliveries became faster during the health crisis,
in part because of less traffic on streets and because DoorDash
became more efficient.
The pandemic also has resulted in stronger demand for
food-delivery companies. Both chain and independent operators have
tapped delivery companies to reach customers as they closed dining
rooms or limited seating indoors.
"What the pandemic has done and what DoorDash has shown, at
least in its filings, is you're able to hit profitability," said
Evercore ISI analyst Benjamin Black, who covers Uber.
In the second quarter this year, DoorDash generated a profit of
$23 million.
Some restaurant companies have pushed back on the fees and costs
that delivery companies charge them. Others, such as Domino's
Pizza, don't use third-party delivery firms, citing those costs and
other factors.
Those battles could intensify in the future. Uber, for example,
said merchants deserved transparency on pricing when it completed
its acquisition of Postmates in December.
DoorDash faced criticism last year from advocates about how its
couriers were compensated, a situation that led it to tweak how it
handles tips that diners leave for them.
The company joined with other on-demand companies to fight a
California law that sought to reclassify contract workers as
full-time employees.
DoorDash's public offering occurred amid a surging stock market
and robust gains among technology companies listing their stocks
for the first time.
So far in 2020, more than $140 billion has been raised on U.S.
exchanges, far exceeding the previous full-year record set at the
height of the dot-com boom in 1999, according to Dealogic data that
date to 1995.
Home-rental startup Airbnb Inc. was expected to price its shares
at $67 or $68 each, above its already increased targeted range,
people familiar with the matter said, in yet another sign of
exuberance in the IPO market.
DoorDash's co-founders, like those from other tech startups,
have sought to shore up voting control of their company.
Mr. Xu will own a special class of stock through which he will
have about 69% of the voting control of the company. Mr. Xu said
potential investors didn't ask questions about his voting
control.
Major owners of DoorDash stock include entities affiliated with
SoftBank Group Corp., Sequoia Capital and the government of
Singapore, according to the company's prospectus for the public
offering.
For the quarter ended Sept. 30, DoorDash reported a loss of $43
million on $879 million in revenue, compared with a loss of $152
million on $239 million in revenue for the year-earlier period.
--Preetika Rana and Maureen Farrell contributed to this
article.
Write to Micah Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
December 09, 2020 18:47 ET (23:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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