The leading food delivery app has decided to make its shares available for the public on the New York Stock Exchange under the symbol “DASH”. The company revealed that business grew, and losses went down in 2020.
For the nine months ended September 30, DoorDash reported its net loss of $149 million which has greatly decreased from the net loss of $533 million over the same nine-month period in 2019. The company’s revenue also boosted to a massive $1.9 billion as compared to $587 million over the same period last year.
In the third quarter of 2020 alone, the company got a total of 236 million orders compared to 70 million in the last year. In the second quarter of this year, it reported a surprising profit of $23 million, however, the company was expecting the costs to go up which would decrease the profitability in the future.
As of September 30, 2020, DoorDash disclosed that it has over 18 million customers, 1 million Dashers (delivery workers), and over 390,000 merchants. Around 5 million customers use its DashPass service that charges $9.99 per month and gives them free delivery services.
DoorDash has planned to offer three classes of shares classified according to voting rights. Class A would have one vote per share, Class B 20 votes per share, and Class C will not have any voting rights.
Tony Xu, CEO and Co-Founder of DoorDash, displayed his vision for the company in the opening letter in the prospectus. He said that the goal is “to build products that transform the way local merchants do business and enrich the communities in which they operate.”
He laid out three mutually enforcing assets that would aid in reaching this goal. The first one is to launch an on-demand logistics platform that will deliver everything, not just food. The second is to build services for merchants to get an insight into their own operations. The last one is to make the DashPass accessible to other local businesses and not just restaurants so that customers can get the benefit from wherever they shop from.
DoorDash has the largest market share in the U.S. with 49% of the delivery sales in September made by the company compared to Uber’s sales which formed 22% and GrubHub’s sales following closely behind with 20%, according to analytics firm Second Measure. In June, DoorDash raised $400 million in equity capital with a valuation of $16 billion.
There have been questions surrounding the company’s business model about worker rights since such companies allow people to work without being full-time employees. The recent passage of Proposition 22 in California enables ride-hailing and food delivery riders to be classified as “independent contractors”. This indicates that they do not qualify for labor benefits including minimum wage, healthcare, or paid time off. This structure proves to be beneficial for gig companies like DoorDash and Uber since they can avoid expenses like unemployment insurance and paid time off.
However, the company warned that their growth may not be the same as it was during the pandemic. DoorDash pointed out that severe competition and the ease and low cost of switching between food delivery apps could be dangerous for the business in the future.
Still, DoorDash’s IPO is one of the most awaited IPOs by investors in 2020. Airbnb, Wish, and Roblox are also expected to launch IPOs this year.
DoorDash’s IPO is being led by Goldman Sachs and JPMorgan, along with Barclays, Deutsche Bank Securities, RBC Capital Markets, and UBS Investment Bank. The co-managers include Mizuho Securities, JMP Securities, Needham & Company, Oppenheimer & Co., Piper Sandler, and William Blair.
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