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 profited 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 Initial Public Offering. The first-day jump, the third largest this year in the United States for a major IPO, gives DoorDash a market cap of US $ 60 billion and a fully diluted value of US $ 71.3 billion – more higher than companies such as Kraft Heinz Co., Lululemon Athletica Inc. and Ford Motor Co.
Investors have looked beyond fears that competition from rivals such as Uber Technologies Inc. will intensify next year, just as vaccine distribution reduces the need to eat at home. The boom in DoorDash 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 US $ 182 after the company valued them at US $ 102 each. They closed at US $ 189.51, nearly 86 percent above the listing price.
The IPO is the third-largest on a U.S. stock exchange this year, surpassed only by the $ 4 billion blank check company 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 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 the situation at home to the urge 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 are going to 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 pick-up in its ridesharing business, which could help subsidize its investment in food delivery.
While DoorDash has helped many restaurants stay afloat as pandemic lockdowns forced them to adopt 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 US $ 160 billion in IPOs on US stock 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 listing projects during the first days of the Covid-19 pandemic are regaining 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 US $ 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.
According to data compiled by Bloomberg, only two companies that raised more than US $ 1 billion saw their shares rise further when they debuted in the United States. Chinese online real estate platform KE Holdings Inc. climbed 87% in its first trading session, while shares of cloud computing firm Snowflake Inc. more than doubled on day one.
Before the pandemic, food delivery companies like DoorDash and rivals Uber Eats and Grubhub Inc. struggled to make 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 US $ 7.3 billion, and Uber to acquire Postmates Inc. for US $ 2.65 billion in an all-share 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.
– With the help of Emily Chang.