DoorDash Debut: From ‘hummus out of a Honda’ to surging shares | US & Canada Information
Shares in unprofitable grocery delivery platform DoorDash Inc. rose as much as 92% on its trading debut Wednesday. It was the latest sign of investor exuberance in what was already a record year for IPOs.
DoorDash, which has picked up on the pandemic-sparked boom in demand for meals brought to your doorstep, saw its shares surge to $ 195.50 in New York after gaining $ 3.37 billion in its initial public offering had applied. The jump on day one, which would be the third largest this year, gives DoorDash a market cap of $ 55 billion and a fully diluted value of $ 66 billion – more than companies like Kraft Heinz Co., Lululemon Athletica Inc. and Ford Motor Co.
Investors looked back on concerns that competition from competitors like Uber Technologies Inc. could intensify over the next year, as vaccine distribution may reduce the need for food at home. DoorDash’s surge is also a good sign for companies like Airbnb Inc. looking to add to the more than $ 160 billion raised from initial public offerings in 2020.
The DoorDash shares opened at $ 182 after the company valued them at $ 102 each. They fell to $ 175.50 at 2:47 p.m. in New York.
The IPO is the third largest on a U.S. stock exchange this year and is only beaten by the $ 4 billion blank check company sponsored by billionaire Bill Ackman and software maker Snowflake Inc.’s $ 3.86 billion offering. including so-called greenshoe stocks.
DoorDash had a 50% market share in the US as of October and, according to records, surpassed UberEats, GrubHub and Postmates. That number has increased from just 17% in January 2018. DoorDash also says there is a chance this market will expand as less than 6% of US citizens currently use its service. Revenue more than tripled in the first nine months of the year and net loss decreased year over year due to the increase in new customers.
Some skeptics don’t expect the increase in home eating to continue.
“If we’re no longer stuck at home and want to hit the road, people are less likely to want to order delivery,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. “You will actually want to go out and go to a restaurant.”
He added that the market could also become more competitive, especially as rival Uber sees a pickup in its rideshare business that could help subsidize its investments in food delivery.
While DoorDash helped many restaurants stay afloat as pandemic lockdowns forced them into a take-away-only model, the fees, which can be 30% of the cost of an order, are viewed by some restaurants as unfair. Certain cities, including New York and Seattle, have limits on the amount of fees that restaurant delivery services can charge.
The company began deliveries in Palo Alto, California, where Tony Xu and his two co-founders were students at Stanford University. You often made the deliveries yourself in the evenings after class.
“It’s certainly surreal,” Xu said in a Bloomberg television interview on Wednesday, recalling the early days when he “was delivering hummus out of my Honda.”
Including DoorDash, companies have IPOs valued at more than $ 160 billion on US stock exchanges this year. This is an all-time high, according to Bloomberg. A few more are expected before the end of the year as companies that postponed listing plans in the early days of the Covid-19 pandemic regain confidence to place their stocks in public markets.
The group’s second-largest is home rental platform Airbnb, which plans to raise up to $ 3.09 billion in its IPO on Wednesday. Others include video game company Roblox Corp., installment loan provider Affirm Holdings Inc., and ContextLogic Inc., parent company of online discounter Wish Inc.
Prior to the pandemic, grocery suppliers like DoorDash and rivals Uber Eats and Grubhub Inc. struggled to make money in tough competition with one another and cut their fees and treatment for workers. Margins in the business are razor-thin, sparking a wave of consolidation with Grubhub agreeing to be bought by Just Eat Takeaway.com NV for $ 7.3 billion in June and Uber to buy Postmates Inc. for $ 2.65 billion in July . USD as part of an all-stock deal.
DoorDash’s offering is led by Goldman Sachs Group Inc. and JPMorgan Chase & Co. Barclays Plc, Deutsche Bank AG, RBC Capital Markets and UBS Group AG are also involved in the transaction. DoorDash’s stock is traded on the New York Stock Exchange under the symbol DASH.