The United States has experienced a rapid change in the outsourcing and sharing economy over the past decade. Everyone used to take cabs, but now they hail a ride instead. Restaurants used to employ many of their own delivery drivers, and while some still do employ delivery staff, the trend has been moving that delivery is being handled by third parties.
DoorDash is a leader in third-party restaurant delivery services, and now it is set to come public via an initial public offering (IPO). DoorDash filed its paperwork with the Securities and Exchange Commission on Friday to sell Class A common shares in an IPO.
The company has not yet determined the number of shares that will be offered, nor has it established a suggested price range per share. The company did list the traditional $100 million placeholder in its filing, but this is unlikely to be the real size of the deal.
DoorDash plans to list its common shares under the ticker DASH on the New York Stock Exchange. One of its top venture backers is Softbank, followed by Sequoia Capital and Greenview Investment. The company’s private market valuation reportedly has risen to more than $15 billion in 2020.
While the sharing economy has been notorious for ramping up to gain market share with no serious concern about profitability, DoorDash could be an exception to that rule. The food delivery provider generated $1.9 billion in revenues in the first nine months of 2020. This tripled from the same period in 2019, with a massive boost having come from the COVID-19 restrictions and lockdowns.
DoorDash lost $149 million over the first nine-month period of 2020, and that was much narrower than the $533 million loss for the same period in 2019. For the three-month period ending in June of 2020, DoorDash generated $675 million in revenue, and it managed to show a $23 million profit for the quarter. The September quarter saw revenue rise to $879 million, but the loss was $43 million.
DoorDash did not originally make the screen for the top IPOs of 2020 that was published late in 2019. At the time, it was believed that the losses were too great and that it did not have enough scale. Then COVID-19 hit and its business boomed. Some questions remain about how much DoorDash will be able to grow after people are finally cleared to and feel safe to go back into restaurant settings again. That said, with over 150,000 daily COVID-19 cases at this time, and with new lockdowns, curfews or other restrictions, it may be the perfect storm for DoorDash.
This IPO is set to have a massive underwriting syndicate. Goldman Sachs and JPMorgan were listed as the first lead underwriters on the tombstone, followed by Barclays, Deutsche Bank, RBC Capital Markets and UBS. Additional co-managers are Mizuho Securities, JMP Securities and Needham.
The latest stats are now impressive as well. DoorDash has served more than 18 million consumers, with over a million people having signed up as delivery “dashers” and 390,000 merchants already in its system.
It has become quite common for the new age companies to have more than one class of common stock so that the founders can maintain control. That is the case for DoorDash as well, with three classes of common stock:
- Class A common stock has one vote per share.
- Class B common stock has 20 votes per share and is convertible at any time into one share of Class A common stock. Upon the completion of the IPO, founders Tony Xu, Andy Fang and Stanley Tang will hold all Class B common shares.
- Class C common stock has no voting rights, except what is required by law, and each will convert into a Class A common share following the conversion or exchange of all outstanding Class B shares into Class A shares or terms per the offering. The filing noted that upon the completion of this offering, no shares of Class C common stock will be issued and outstanding.
DoorDash also has launched its DashPass membership program, wherein customers sign up and pay a flat monthly delivery fee of $9.99 for unlimited deliveries from eligible merchants. While DoorDash deliveries come primarily from restaurants at this time, the company says that it wants the membership program to become “a wallet for the physical world.” On top of restaurants, it sees all local businesses in customers’ communities.