Shares of unprofitable food delivery platform DoorDash Inc. jumped 92% when they debuted on Wednesday, in the latest sign of investor exuberance in what has already been a record year for IPOs. in stock exchange.
DoorDash, which benefited from the explosion in demand for meals brought to your door, fueled by the pandemic, saw its shares soar to $ 195.50 in New York after raising $ 3.37 billion during its IPO. The first-day jump, which if sustained would be the third largest this year, gives DoorDash a market cap of $ 55 billion and a fully diluted value of $ 66 billion – larger than companies like Kraft Heinz Co., Lululemon Athletica Inc. and Ford Motor Co.
Investors have looked beyond fears that competition from rivals such as Uber Technologies Inc. could intensify next year, just as vaccine distribution reduces the need to eat at home. DoorDash’s surge also bodes well for companies like Airbnb Inc. looking to add to the more than $ 160 billion already raised by IPOs in 2020.
DoorDash shares opened at $ 182 after the company valued them at $ 102 each. They slipped to $ 175.50 at 2:47 p.m. in New York City.
The IPO is the third-largest on a U.S. stock exchange this year, surpassed only by the $ 4 billion blank check firm backed by billionaire Bill Ackman and the manufacturer’s $ 3.86 billion bid. Snowflake Inc. software, including so-called greenshoe stocks.
DoorDash held 50% of the U.S. market share in October, overtaking UberEats, GrubHub and Postmates, according to its filing documents. That number is up from just 17% in January 2018. DoorDash said there was an opportunity for this market to grow as well, with less than 6% of U.S. residents currently using its service. Revenue for the first nine months of the year more than tripled, and its net loss declined from a year earlier due to an increase in new customers, the company said.
Some skeptics don’t expect the increase in home meals to last.
“As we move from being at home to wanting to venture out, people are less likely to want to go and order delivery,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. “They will really want to go out and eat out.”
He added that the market could also become more competitive, especially as rival Uber sees a pick-up in its rideshare business, which could help subsidize its investment in food delivery.
While DoorDash has helped many restaurants stay afloat as pandemic lockdowns forced them to move to a take-out-only model, the fees it charges, which can be up to 30% of the cost of an order, are considered unfair by some restaurants. Some cities, including New York and Seattle, have set limits on the amount of fees delivery services can charge restaurants.
The company began by making deliveries to Palo Alto, California, where Tony Xu and his two co-founders were students at Stanford University. They often did the deliveries themselves in the evenings after school.
“It’s certainly surreal,” Xu said Wednesday in an interview with Bloomberg TV, recalling his early days “delivering hummus from my Honda.”
Including DoorDash, the companies have now raised more than $ 160 billion in IPOs on U.S. exchanges this year, a record high, according to data compiled by Bloomberg. Several more are expected before the end of the year, as companies that postponed their registration plans during the first days of the Covid-19 pandemic regain confidence to put their shares on the public markets.
The second largest of the group is home rental platform Airbnb, which is looking to raise up to $ 3.09 billion when it goes public on Wednesday. Others include video game company Roblox Corp., installment loan provider Affirm Holdings Inc., and ContextLogic Inc., the parent company of online discount retailer Wish Inc.
Before the pandemic, food delivery companies like DoorDash and their rivals Uber Eats and Grubhub Inc. struggled to make any money amid fierce competition among themselves and backlash over their fees and processing. workers. The company’s margins are thin as a razor, causing a wave of consolidation that saw Grubhub agree in June to be bought out by Just Eat Takeaway.com NV for $ 7.3 billion, and Uber to acquire Postmates. Inc. for $ 2.65 billion in an all-stock deal in July. .
The DoorDash offering is led by Goldman Sachs Group Inc. and JPMorgan Chase & Co., with Barclays Plc, Deutsche Bank AG, RBC Capital Markets and UBS Group AG also on the deal. DoorDash shares trade on the New York Stock Exchange under the symbol DASH.