Saturday, December 9, 2023

DoorDash shares open 80% in IPO frenzy

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DoorDash reached a market value of close to $ 60 billion when it debuted on the stock exchange, capping a dramatic rise for the U.S. meal delivery company whose business flourished during the pandemic while eliciting a reaction from restaurant groups.

Shares of DoorDash began trading at $ 182 on Wednesday – nearly 80% above their initial public offering price – a sign of unrestrained demand from public investors for fast-growing, tech-driven companies.

The San Francisco-based company had sold shares to investors for $ 102 each Tuesday night, above its target price range, generating nearly $ 3.4 billion in revenue. He had already increased the price range once last week.

“It’s certainly surreal,” said Tony Xu, managing director of DoorDash, whose stake was valued at $ 2.7 billion at opening price. “I would say that for me, however, it was always about chasing customers and striving for excellence, not chasing the scoreboard.”

Mr. Xu said DoorDash received “a lot more requests” for its shares than the amount it was able to issue.

The company has rapidly increased become the largest player in the U.S. food delivery market, taking 50 percent of total order value in October, according to data from Edison Trends.

But it has also faced backlash from some restaurant groups, who say its commission rates are too high. In several cities, authorities intervened to reduce costs during the pandemic.

Investors also questioned whether DoorDash and its competitors could be profitable in the long run, leading to a wave of consolidation in the industry this year.

“They have proven that they have outperformed their competition one by one and burned a lot less money than Uber Eats trying to enter that market,” said Alfred Lin, partner at Sequoia Capital and lead investor in DoorDash.

DoorDash reported a surprise second-quarter profit of $ 23 million as demand for food deliveries increased during the pandemic. In its last full year of operation, the company recorded a net loss of $ 667 million on revenue of $ 885 million.

“Once they start trading, the Big Three online food delivery companies in the United States will operate under the gaze of government procurement, and investors in public companies will be less patient when it comes to investing. millions and millions of dollars in marketing and promotion. campaigns if it’s not going to generate profits and cash flow, ”said Tom White, senior research analyst at DA Davidson.

DoorDash burned down with private funding before going public. SoftBank’s Vision Fund and Sequoia together own over 40% of the company’s Class A common shares after the offer.

At the IPO price, SoftBank’s stake was worth $ 6.4 billion and Sequoia’s was nearly $ 5.3 billion, and those totals have grown significantly with the start of trading.

The listing also offered a notable victory for the Vision Fund, which first invested with a valuation of $ 1.4 billion in 2018. Private investors recently valued DoorDash at around $ 16 billion in June.

Along with the DoorDash co-founders, Mr. Xu retains control of the company through Class B special ordinary shares with 20 votes per share.

DoorDash used a so-called hybrid auction process to price its shares during the IPO, asking potential investors to submit bids with specific prices and quantities of shares.

The process gave DoorDash executives access to more information about the company’s demand for shares – a difference from traditional IPOs, where bankers often suggest a price after discussions with investors. influential.

Goldman Sachs and JPMorgan were the main underwriters of the offer.


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